How Does the Capital Efficiency of a Market Maker Change with a Consistently High Fill Rate?
A consistently high fill rate generally improves capital efficiency, assuming the trades are profitable. High volume allows the market maker to utilize their collateral more effectively by generating higher returns per unit of capital.
However, an excessively high, unprofitable fill rate can quickly erode capital and reduce efficiency due to increased risk exposure and losses.
Glossar
Capital Efficiency
Leverage ⎊ Capital efficiency, within cryptocurrency and derivatives, fundamentally represents the maximization of risk-adjusted returns relative to capital at risk, a metric increasingly vital given regulatory constraints and market volatility.
High Fill Rate
Execution ⎊ High Fill Rate, within cryptocurrency derivatives and options trading, denotes the proportion of an order fully satisfied at the requested price or better, reflecting efficient market access and liquidity.
Fill Rate
Metric ⎊ Fill rate is a crucial execution metric representing the percentage of an order's total requested volume that is successfully executed at or better than the specified limit price.