Frequent Batch Auction (FBA)

Ithaca employs a Frequent Batch Auction (FBA) mechanism to match orders.

FBAs run across multiple order books with different products, underlyings, maturities; which allows for the seamless handling as well as the synchronised execution of multi-leg linked / conditional orders.

To begin with Ithaca is focused on wrapped ETH on Arbitrum as underlying.

FBAs have started being seen as providing significant advantages over continuous limit order books (CLOBs) for end users:

1. Enhanced Efficiency: Frequent batch auctions improve efficiency by consolidating orders and executing them at regular intervals mitigating order fragmentation and leading to more accurate price discovery.

2. Reduced Market Manipulation: Frequent batch auctions (FBAs) offer a robust defense against the high-frequency trading arms race where traders engage in a competition to gain an informational and speed advantage so as to execute trades milliseconds ahead of others. By executing trades at fixed intervals, FBAs reduce the emphasis on speed and split-second decision-making. This levels the playing field and diminishes the advantages gained by high-frequency traders. Continuous Limit Order books are susceptible to destabilization due to rapid order cancellations, front-running, and order imbalances. Such instability can compromise market integrity and hinder fair price discovery.

FBAs mitigate order book instability by aggregating orders and executing them simultaneously in batches. This reduces the impact of order cancellations and front-running, as all orders are processed collectively. The batch execution also ensures a balanced order book, promoting stability and transparency.

By embracing FBAs, market participants can transcend the high-frequency trading arms race and its associated challenges. FBAs provide a structured trading mechanism that resists speed-driven imbalances, enhances market stability, and safeguards the interests of all participants.

3. Mitigated Operational Risk: With frequent batch auctions, operational risks associated with order execution are significantly reduced. Simultaneous batch execution minimizes the chances of order collisions, front-running, and order book imbalances. This design choice enhances market stability and safeguards the interests of users.

4. Improved Liquidity: Our frequent batch auction system attracts a diverse range of participants, resulting in deep and robust liquidity. By concentrating trading activity at specific intervals, it ensures a concentrated market, facilitating better trade execution and reducing potential market disruptions.

5. Regulatory Recognition: Frequent batch auctions have garnered recognition in regulatory reports for their potential benefits highlighting its positive impact on market quality, fairness, and transparency.