> For the complete documentation index, see [llms.txt](https://docs.clickoptions.ai/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.clickoptions.ai/earn/market-maker-lp-program.md).

# Market Maker / LP Program

## Market Maker / Liquidity Provider Program

ClickOptions integrates professional Market Makers (MMs) to deliver continuous, competitive, and **demonstrably best-priced** options quotes. This page defines the **obligations, monitoring, and enforcement** that make that promise measurable rather than aspirational.

#### The ClickOptions difference — a price-improvement mandate

For most venues, a market maker's core duty is simply to be **present** with a quote. On ClickOptions, presence is the *baseline*, not the obligation. The binding commitment is **price improvement**: MMs contractually undertake to quote **tighter spreads and lower premiums than the wider market for at least 95% of the time**, per instrument — a stricter, *relative* performance standard rather than a simple presence requirement.

#### Vault-integrated model

* The **ClickVault** is the settlement pool. MMs are **price-feed providers**, not fund managers.
* Because ClickOptions uses a **portfolio-margin model**, a short option does not require separate maintenance margin per position — risk is managed at the Vault level.
* MMs **lock capital into the Vault** as regular contributors, aligning their incentives with settlement solvency. They never control Vault assets directly.

***

### 1. Onboarding

1. **Capital Lock** — each MM locks **250,000–1,000,000 USDT** into the Vault (final amount set by ClickOptions) as a regular contributor.
2. **Acknowledgment** — the MM operates strictly as a **price-feed provider** and does not direct Vault assets.
3. **Integration** — connectivity via **API / FIX**, with mass-quote support and exchange-side **Market Maker Protection (MMP)** (see §7).

***

### 2. Quoting Obligations

#### 2.1 Price-Improvement Obligation — the 95% Standard

For every instrument in the **Core Coverage Set** (§2.5), the MM's live two-sided quote must **improve on the Consolidated External Best** for **≥ 95% of evaluated snapshots per instrument, per UTC day**.

**Consolidated External Best (CEB)** — the tightest bid and lowest ask across the major external options venues, taken from the ClickOptions market-data pipeline's synchronized top-of-book (the same normalized, per-underlying USD feed used by our public pricing benchmarks).

A snapshot **qualifies as improving** when **both** hold:

$$
\text{CO Ask} \le \text{CEB Ask} \quad\text{(lower premium to buy)} \qquad\text{and}\qquad \text{CO Spread} \le \text{CEB Spread}\quad\text{(tighter market)}
$$

* The obligation is **relative** (versus the live external market), which automatically adapts to volatility regimes — unlike a fixed spread cap.
* For deep-OTM series whose fair bid is zero, the obligation applies to the **offer (ask) side only** — a lower premium than the external best ask (see §2.2).
* The **Maximum Quote Width** matrix (§2.3) is an independent absolute ceiling that applies at all times, including when no external quote exists.

#### 2.2 Continuous Presence

* **Presence Ratio ≥ 99%** of each UTC day, quoting **24/7**.
* Quotes must be **two-sided wherever a genuine two-sided market exists**. For deep-OTM tail series whose fair bid is zero, a one-sided **ask-only** quote is normal and fully satisfies the obligation — the MM is not required to post a non-zero bid where none is warranted.
* A **valid quote** — the unit counted in every ratio — must be **resting ≥ 3 seconds**, **within the Maximum Quote Width** (§2.3), and **at or above the Minimum Quote Size** (§2.4) on each side it is required to show. Flickering or sub-second quotes do not count.

#### 2.3 Maximum Quote Width (absolute ceiling)

An absolute ceiling on the bid-ask width an MM may show, adaptive by moneyness and tenor — caps widen with both distance from the money and time to expiry. Values are a **percentage of the option mark**:

| Moneyness (distance of strike from spot) | ≤ 7 DTE | 8–30 DTE | 31–90 DTE | > 90 DTE |
| ---------------------------------------- | ------- | -------- | --------- | -------- |
| **ATM** (±2%)                            | 1.0%    | 1.5%     | 2.5%      | 4.0%     |
| **Near** (2–10%)                         | 2.0%    | 3.0%     | 5.0%      | 8.0%     |
| **Wing** (10–25%)                        | 5.0%    | 8.0%     | 12.0%     | 20.0%    |
| **Deep** (>25% or \|Δ\| < 0.10)          | 15.0%   | 25.0%    | 35.0%     | 45.0%    |

> Under **Stressed Market Conditions** (§4) every cap in this table is **doubled**.

#### 2.4 Minimum Quote Size & Depth

* **Best of book:** ≥ **0.1 BTC** / **1 ETH** on each side (for BTC, equal to **10× the 0.01-BTC contract minimum**).
* **Depth of book:** ≥ **5 BTC** / **100 ETH** aggregated across the near-ATM, short-dated strikes.
* Size requirements scale adaptively with moneyness and tenor; wings and long-dated series carry lighter depth obligations.

#### 2.5 Instrument Coverage

* **Core Coverage Set** = all listed BTC and ETH series with **DTE ≤ 90** and **|moneyness| ≤ 25%**. The 95% price-improvement and presence obligations apply to this set.
* MMs must maintain valid quotes in **≥ 90% of the Core Coverage Set** at all times.
* Far-dated (>90 DTE), deep-wing, and newly-listed series are **encouraged** but excluded from the binding ratios.

***

### 3. Pricing-Continuity Standard

Beyond individual quotes, MMs must maintain a **fair, orderly, and continuous price path**:

* **No gapping.** Consecutive quote updates on the same instrument may not move the mid by more than the greater of **one tick** or **1.5× the current Maximum Quote Width**, absent a corresponding move in the underlying index. This prevents discontinuous "jump" pricing.
* **Mandatory re-entry after a fill.** After an MMP freeze or a fill that exhausts displayed size, the MM must re-quote within the **Frozen Interval of 5 seconds** (§7).
* **No stale, locked, or crossed quotes.** Quotes must track the index; a quote that crosses the CEB in the MM's own favor for longer than one snapshot is treated as a continuity breach.
* **Two-sided wherever a two-sided market exists** during obligated hours (ask-only is acceptable on zero-bid tails, per §2.2), except under §4 conditions.

***

### 4. Exceptional & Stressed Market Conditions

ClickOptions applies a two-tier carve-out framework covering both temporary market dislocations and outright emergencies.

**Exceptional Circumstances — obligations suspended.** Quoting obligations (§2–§3) do **not** apply during, and ClickOptions will publish the start and resumption of, any of:

* extreme volatility triggering platform-wide circuit breakers;
* a reference-venue or market-data-feed outage that prevents a reliable Consolidated External Best;
* an inability to prudently hedge or manage risk (clearing, margin, or connectivity failure);
* war, cyber-sabotage, or other force-majeure events.

**Stressed Market Conditions — obligations relaxed.** Triggered automatically by significant short-term moves in price, volume, or implied volatility. For the duration of the stress window (default **10 minutes**, auto-extending while the trigger persists):

* **Maximum Quote Width doubles** (§2.3) and **Minimum Quote Size halves** (§2.4);
* the **Price-Improvement threshold is relaxed from 95% to 80%**;
* presence obligations continue.

***

### 5. Monitoring & Measurement

Compliance is **computed continuously, qualified daily, and reviewed monthly**.

**Sampling.** The compliance engine snapshots every MM's book **every 10 seconds** and reconciles each snapshot against the latest Consolidated External Best from the market-data pipeline.

**Daily qualification.** An **instrument-day is compliant** when, over that day's snapshots:

* Price-Improvement Ratio **≥ 95%** (≥ 80% under Stressed Conditions), **and**
* Presence Ratio **≥ 99%**, **and**
* no unresolved Pricing-Continuity breach (§3).

**Monthly review.** An MM is compliant for the month if compliant instrument-days cover the Core Set within a **tolerance of 3 violation-days per instrument per month**. Tiers and rebates for the next month are set from this review.

**Scorecard & reporting.** Each MM receives a **daily report card (T+1)** tracking:

| KPI                         | Definition                                                           |
| --------------------------- | -------------------------------------------------------------------- |
| **Price-Improvement Ratio** | % of snapshots at-or-better than the Consolidated External Best      |
| **Presence Ratio**          | % of snapshots with a valid two-sided quote                          |
| **Spread Quality**          | time-weighted depth of improvement inside the external best (see §6) |
| **Depth Score**             | average displayed size ÷ minimum required size                       |
| **Coverage**                | % of the Core Coverage Set quoted                                    |
| **Continuity Flags**        | count of §3 breaches                                                 |

***

### 6. Scoring & Rewards

A monthly **composite score** blends the §5 KPIs and sets the reward tier. The **Spread-Quality multiplier** rewards *how far inside* the external best the MM quotes — a distance-graded gradient rather than a binary pass/fail:

| MM improvement vs. Consolidated External Best       | Multiplier |
| --------------------------------------------------- | ---------- |
| Strictly inside by **≥ 50%** of the external spread | **5×**     |
| Inside by **25–50%**                                | **2×**     |
| At or inside by **0–25%**                           | **1×**     |
| Outside the external best (an obligation miss)      | **0×**     |

| Incentive             | Mechanism                                                                                                                                         | Notes                                                    |
| --------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------- |
| **Revenue Share**     | <div class="math math-display">\text{MM Share} = \frac{\text{MM Vault Deposit}}{\text{Total Vault Capital}} \times \text{Vault Performance}</div> | Proportional to the MM's Vault stake.                    |
| **Maker Fee Rebates** | Negative maker fees applied automatically on execution.                                                                                           | Scaled by composite score and Spread-Quality multiplier. |
| **Variable Rewards**  | Monthly incentive multiplier from the scorecard.                                                                                                  | Higher score → higher rebate tier.                       |

***

### 7. Risk Controls

ClickVault enforces portfolio-level controls (CAR, Coverage Ratio). On top of these, each MM is bound by **dynamic Delta, Vega, and Quantity limits** that scale with Vault size, plus exchange-side **Market Maker Protection (MMP)** — automatic quote-pull when a risk threshold is breached.

| Limit                 | Formula                                                                                                                   | Scaling  | Example (Vault = 10M USDT, index = 100k)                                                          |
| --------------------- | ------------------------------------------------------------------------------------------------------------------------- | -------- | ------------------------------------------------------------------------------------------------- |
| **Delta**             | <div class="math math-display">\Delta\_{\text{limit}} = \alpha \times \frac{\text{VaultCapital}}{\text{IndexPrice}}</div> | α = 0.5  | <div class="math math-display">0.5 \times \frac{10{,}000{,}000}{100{,}000} = 50 \text{ BTC}</div> |
| **Vega**              | <div class="math math-display">\text{Vega}\_{\text{limit}} = \beta \times \text{VaultCapital}</div>                       | β = 0.02 | <div class="math math-display">0.02 \times 10{,}000{,}000 = 200{,}000 \text{ USD}</div>           |
| **Quantity** (per 2s) | <div class="math math-display">Q\_{\text{limit}} = \gamma \times \frac{\text{VaultCapital}}{\text{IndexPrice}}</div>      | γ = 0.1  | <div class="math math-display">0.1 \times \frac{10{,}000{,}000}{100{,}000} = 10 \text{ BTC}</div> |

* **Frozen Interval:** 5 seconds before new quotes are accepted after an MMP trip.

***

### 8. Enforcement Ladder

Graduated for ordinary quote misses, immediate for abuse:

1. **Automated alert (real-time).** MMP protects the MM; the compliance engine flags any same-day breach on the report card.
2. **Non-compliance notice.** Issued when an instrument misses its daily qualification beyond the tolerated violation days.
3. **Cure period — 5 trading days** to restore KPIs.
4. **Rebate reduction / tier demotion** at the next monthly review if monthly KPIs are missed.
5. **Revenue-share suspension** after **2 consecutive** non-compliant months.
6. **Removal from the program** after **3 consecutive** non-compliant months, or on repeated Pricing-Continuity breaches.
7. **Immediate offboarding and reward clawback** for market abuse — wash or fictitious quotes, quote-fading/spoofing, or front-running the Vault.

> Related: Staking & Vault Participation · Fees and Commissions · Pricing & Spread Benchmarks


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