Range Orders

Besides traditional market and limit orders, the CVEX protocol implements a novel type of order, distinct from traditional order book style exchanges, known as a Range Order. This order type allows traders to uniformly distribute liquidity across various price levels within a specified range, similar to the concentrated liquidity provision in modern DEXes, first introduced in Uniswap 3.

Range Orders offer efficient means for profiting from liquidity provision, enabling a wide array of arbitrage strategies. For both takers and makers, these orders are managed in an 'all-in-one' approach. For makers, operational fees are paid once, despite placing liquidity across numerous price levels. When matched, multiple intersecting range orders are processed together, filling them uniformly.

After execution, Range Order creates Range Position, which manages a series of open limit orders across the selected price range. This setup entails long orders positioned at price levels below the current market price and short orders at levels above it. As the market price crosses specific ticks, liquidity from range orders fills corresponding market orders.

Concurrently, when a long order is matched at a particular price level, it is immediately re-established as a short order at the same level upon execution, and the reverse happens for short orders. This dynamic adjustment of orders ensures continuous engagement with market movements within the specified range.

Importantly, owners of Range Positions receive maker rewards each time their liquidity is used to fill market orders. However, they incur operational fees only once, regardless of the duration of the Range Order or the number of rearrangements made by the system. This efficiency in fee structure makes range orders particularly effective for liquidity provision.

Maintaining a Range Position requires a margin that increases as the price moves away from the entry point, leading to more contracts held by the trader. Yet, the low operational costs of managing Range Positions allow for frequent adjustments in response to market movements.

The introduction of Range Orders merges the efficiency and familiarity of a traditional order book with market and limit orders and the modern mechanisms of liquidity provision found in decentralised exchanges. This synergy offers traders the best of both worlds: combining the precision of specific price level targeting in traditional systems with the dynamic, cost-efficient liquidity strategies of modern DEXes.

Last updated