Market Making Skill

Automated two-sided quoting on prediction markets with inventory skew, volatility-adjusted spreads, and risk controls.

Supported Platforms

• Polymarket (post-only maker orders, zero taker fees)
• Kalshi

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Chat Commands

Lifecycle

/mm start <platform> <marketId> <tokenId> [flags]   Start market making
/mm stop <id>                                        Stop and cancel all orders
/mm list                                             List active market makers

Monitoring

/mm status                     Overview of all active MMs
/mm status <id>                Detailed state for one MM

Configuration

/mm config <id>                View current config as JSON
/mm config <id> --spread 3     Update config (takes effect next requote)

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Start Flags

Flag	Default	Description
--spread N	2	Base half-spread in cents
--min-spread N	1	Minimum spread floor (cents)
--max-spread N	10	Maximum spread cap (cents)
--size N	50	Order size per side (shares)
--max-inventory N	500	Max inventory before aggressive skew
--skew N	0.5	Inventory skew factor (0-1)
--vol-mult N	10	Volatility multiplier for spread widening
--alpha N	0.3	EMA alpha for fair value smoothing (0-1)
--fv-method M	weighted_mid	Fair value method: mid_price, weighted_mid, vwap, ema
--interval N	5000	Requote interval in ms
--threshold N	1	Min price change (cents) to trigger requote
--max-pos N	1000	Max position value in USD
--max-loss N	100	Max loss before auto-halt (USD)
--max-orders N	1	Orders per side (levels)
--level-spacing N	(=spread)	Cents between price levels
--level-decay N	0.5	Size decay per level (0-1, e.g. 0.5 = each level half of previous)
--neg-risk true	false	Enable negative risk mode (Polymarket crypto)
--name "Name"	auto	Display name for the outcome

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Examples

# Start with defaults
/mm start polymarket 0xabc123 98765

# Custom spread and sizing
/mm start polymarket 0xabc123 98765 --spread 3 --size 100 --max-inventory 1000

# Tight spread for liquid market
/mm start polymarket 0xabc123 98765 --spread 1 --min-spread 1 --max-spread 5 --interval 2000

# 3-level quoting: L1=50 shares, L2=25, L3=12 — spaced 2c apart
/mm start polymarket 0xabc123 98765 --max-orders 3 --level-spacing 2 --level-decay 0.5 --size 50

# Check all running MMs
/mm status

# Widen spread on the fly
/mm config polymarket_98765678 --spread 4

# Shut down
/mm stop polymarket_98765678

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How It Works

1. Fair value computed from orderbook (weighted mid, VWAP, or EMA)
2. Spread adjusted by recent volatility (wider in volatile markets)
3. Skew shifts quotes away from overweight side to manage inventory
4. Quotes placed as post-only maker orders (bid and ask)
5. Requote cycle: cancel all, recalculate, place new orders
6. Auto-halt if realized P&L exceeds max loss threshold

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API Usage

import { createMMStrategy, type MMConfig } from '../trading/market-making';

const config: MMConfig = {
  id: 'btc-yes',
  platform: 'polymarket',
  marketId: '0x...',
  tokenId: '12345',
  outcomeName: 'BTC > 100k',
  baseSpreadCents: 2,
  minSpreadCents: 1,
  maxSpreadCents: 10,
  orderSize: 50,
  maxInventory: 500,
  skewFactor: 0.5,
  volatilityMultiplier: 10,
  fairValueAlpha: 0.3,
  fairValueMethod: 'weighted_mid',
  requoteIntervalMs: 5000,
  requoteThresholdCents: 1,
  maxPositionValueUsd: 1000,
  maxLossUsd: 100,
  maxOrdersPerSide: 1,
};

const strategy = createMMStrategy(config, { execution, feeds });
botManager.registerStrategy(strategy);
await botManager.startBot(strategy.config.id);