Market Maker KPI

Three KPIs carry most of the weight. Spread caps the distance between the best bid and the best ask, usually in basis points. Depth sets the minimum notional resting on each side within a stated distance from the mid price. Uptime sets the proportion of the measurement period during which the spread and depth obligations are both satisfied simultaneously. The three interact, which is why quoting any one of them alone is misleading. A very tight spread with almost no size behind it is easy to maintain and close to useless to anyone trying to trade. Deep size at a wide spread is expensive to cross. High uptime on a loose spread target means little. This is why a serious agreement states all three together and requires them to hold at the same time, rather than reporting each in isolation. The definitional details are where disputes originate. Depth needs a distance from mid to be meaningful, since size sitting two percent away is not the same as size at half a percent. Uptime needs a sampling frequency, because a target measured hourly and one measured per second describe very different services. Every KPI needs a venue list, since obligations met on one exchange say nothing about the others. Agreements that leave these unstated are not enforceable, however precise the headline numbers look.