2/ We've done this for OKX before, so you know the drill. Run experiments and look at data. When we first onboard to an exchange, we port over our vanilla MM strategy first. Isolate the infra setup with minimal strategy configuration. Scaling up is easier with positive live pnl.
3/ There is little to read on Coinbase latencies online, so we started with REST order entry for simplicity. The vanilla strategy did enough volume to get us into the market maker fee tiers. Our account manager recommended switching to FIX asap. We were the only MMs using REST!
4/ Maybe some actionable alpha at this fork in the road. Writing your first FIX integration is a lot of work! It's hard to predict latency's effect on pnl. It was a bull market though and we were in horizontal scaling mode. Strategy printed everywhere, just write more infra.
5/ So we took the plunge and did it. FIX is almost order of magnitude faster than REST, and less noisy. Our volume more than doubled. Pnl % increase meaningless for the delta we saw. Moral of the story: high onboarding cost for startups. Coinbase is optimized for tradfi MMs.
6/ Aside on FIX latency optimization: we weirdly did not find a statistically significant difference between the 6 AZs. One explanation is the matching engine uses a network load balancer in front with machines in different AZs. Or they introduce a fairness delay (less likely)
7/ The tradfi analogs don't stop with order entry though. They also provide and L3 feed. You can see all retail stops there. But the L3 feed backlog is insanely spiky, so to use it you should merge a fast L2 book with L3 info potentially out of date. More custom infra!
8/ Another important latency is between the NJ equity colos and Ashburn AWS data center. You can bet the tradfi MMs have optimized equities data coming in. We talked to providers and set up an 80/20 solution, but can't say it's worth the effort.
9/ Finally, Coinbase gives the best fees to 1 or 2 biggest MMs. Requirement is ~10% of (two-sided!) volume, depending on the month. It's an insane fee differentiator. All in all, the flow on Coinbase is quite toxic compared to the international big guys
10/ I'm not saying it's a bad business model: the liquidity on majors is quite solid, so targeting tradfi to help retail does work. However, for new teams starting out, it's worth considering the infra moats. Hopefully this thread was helpful for your onboarding.
@chameleon_jeff @threadreaderapp unroll #HFT