Advancing Exchange Liquidity: Unveiling the Evolution of Market Makers

In the complex ecosystem of exchanges, market makers play a pivotal role by providing liquidity through quoting bid and ask prices that deviate slightly from the mid-price. Automated market making advances this process, involving the continuous management of markets for single or multiple assets. While the field has a robust history, arguably culminating in the optimal algorithm proposed by Avellaneda & Stoikov (2008), this paper investigates the contemporary landscape of optimal market making. We propose a novel paradigm: a streamlined market-making model driven by two core parameters: spread and give. The effectiveness of this model is demonstrated through simulations, validating its potential in active trading scenarios.