Block Auction Guide

Block Auction is a tool that allows traders to match outside of the CLOB (Central-Limit Orderbook), at Mark Prices. Auctions run with a set frequency throughout the day, and users input their interest (size and either a buy or sell) into a contract prior to expiry. The content of this interest is not visible to anyone, but everyone is notified that there is interest in the contract. Matching is done on a FIFO basis, with the normal risk checks in place. If a user matches with someone else, the order is executed, either in part or in full. If there is no match, no trade is done, and all open orders are cancelled. The examples below best illustrate the scenarios.

Minimum order side for Block Auctions: 5 BTC (where applicable) or 50 ETH (where applicable).

Auctions will run every 15 minutes at 05, 20, 35, 50 minutes on the hour,

with the first Auction launched at 12:05 am GMT on January 12.

Scheduling and frequency can change in the future or by product. Stay tuned.

The very first auction opens. There are now 15 minutes on the clock (until it expires). All trades will be matched on a FIFO (First-in-first-out basis). Meaning the earlier in the cycle a user enters their interest, the greater their odds of being matched.

First, User A inputs interest to buy 20 XBTUSD:H21
Second, User B inputs interest to sell 10 XBTUSD:H21
Third, User C inputs interest to sell 20 XBTUSD:H21.

(Note to input any order, a certain amount of margin will be withheld from the inputting trader).

Assume the clock hits 0, and nobody else has input any interest. The system observes the Mark Price of the contract at that time and gives the following positions:

User A (assuming he has sufficient collateral at that point in time) buys 20 XBTUSD:H21
User B (assuming he has sufficient collateral at that point in time) sells 10 XBTUSD:H21
User C (assuming he has sufficient collateral at that point in time) sells 10 XBTUSD:H21

User C in this case has a balance of 10 XBTUSD:H21 that is not filled. This remaining quantity is cancelled, and not carried over to the next auction.

For all positions that are filled, the positions appear normally in the positions blotter.

Matching through implieds. A key advantage of Alpha5 is implied orderbook matching, meaning that more than one channel of liquidity is tapped to try and fill interest. Assume we have started an auction cycle and the following interest is input:

First, User A inputs interest to buy 20 XBTUSD:H21
Then, User B inputs interest to sell 10 XBTUSD
Third, User C inputs interest buys 6 XBTH21

If no other entries are input, the following happens:

User A (assuming he has sufficient collateral at that point in time) buys 6 XBTUSD:H21
User B (assuming he has sufficient collateral at that point in time) sells 6 XBTUSD
User C (assuming he has sufficient collateral at that point in time) buys 6 XBTH21

In this case, User A and B received a partial fill, and User C was fully matched, and this happened despite nobody having an interest in the exact same contract. The system realized that it could match the XBTUSD:H21 interest with the individual XBTUSD and XBTH21 contracts and looked for the optimal solution.

All 3 users would have risk flow into their positions blotter as usual, and any unfilled portion of their order would be cancelled.

If a user places an order in a particular contract, they cannot place an offsetting interest in the same contract for the same auction, even if it is implied.

I.e. If a user inputs an order to buy XBTUSD:H21, they cannot also enter an order to sell XBTUSD, or sell XBTUSD:M21 or any other contract in which they would be a seller of XBTUSD in the same auction. The same holds true for H21 exposure. This is a key protection against self-trading.

Note: Risk check (IM & MM calculation and methodology) will be the same as on the Futures Platform with the same procedures for wallet & balance checks

Note: Mark Price the same Mark Price of contracts on the Futures Platform

Note: Fills in Spreads contracts will be given in the same way as on the Futures Platform

Note: Fees and processes like settlement and liquidation will be the same as are currently for Futures Platform since these positions will be added to the user account

Note: Auction orders/trades under order history/trade history will have the type “Auction”

If you have any questions related to Alpha5 exchange, feel free to contact us 24/7 via Alpha5 Customer Support: support@alpha5.io

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