Micro order books
The biggest problem with previous on-chain order books was storing everything together in one big shared account. This design creates real pain points, specifically when implemented on Solana:
All makers looking to update quotes are competing to get write access to the order book state
This also increases priority fees and makes it expensive for everyone to update their quotes
The hot path of cancelling all orders and placing around a new mid price is computationally expensive
Archer takes a completely different approach with Micro Order Books. Instead of one shared book, each market maker gets their own dedicated on-chain order book - a small, sovereign account that only they control.
This simple change brings huge benefits:
No more contention - You can update your quotes anytime, without competing against other makers or takers for a write lock.
Near zero priority fees - Since all makers have their own dedicated order book state, the priority fees are near zero and minimal because of zero contention. This significantly reduces the cost basis for market making and leads to tighter spreads.
Efficient hot path - Most market making operations include cancelling all existing orders and placing them around a new updated mid price. Archer's order book cancellations and updates are 200x more efficient than previous solutions, enabling maker to pay minimal priority fee for getting their updates placed at the top of the block by leader nodes on Solana.
Micro order book (MakerBook)
A micro order book (or MakerBook in the Archer codebase) is a dedicated order book for a market maker on Archer. One fundamental design decision about MakerBook is that the order levels are stored as offsets defined from a particular mid price on that book. For example, in a traditional CLOB, a maker placing orders around an implied mid price of 150.000 USD per SOL, the book will store makers' orders as:
Order 1: BUY 10 SOL at 145.000
Order 2: BUY 20 SOL at 140.000
Order 3: SELL 10 SOL at 155.000
... and so on.
On Archer, we store the same information a bit differently. The micro book of a maker has a mid price value stored that they can constantly update, and all the orders are simply an offset from that defined mid price. So, on a micro book, we'd store the above orders as below:
Mid price: 150.000
Bid levels: [ (-5, 10), (-10, 20)]
Ask levels: [ (+5, 10) ]
The order levels are stored as a tuple of (offset, size). The offset can be mentioned in ticks and the size in base lots. More information about the units system (ticks, lots, atoms) can be found here.
The biggest benefit of storing orders as offsets is that it enables makers to simply update the mid price on their maker book and all the bids and ask levels directly shift around the newer mid price. This brings down the computational costs for cancelling and updating orders on a maker book significantly. All orders can simply be cancelled by resetting the levels in O(1) and all the existing orders can be centered around a new mid price in O(1) complexity. The compute units consumed by common operations for an MM on Archer are as follows:
Cancel all orders
180
205x
Update mid price
212
180x
Update all levels
4500
11x
From an internal production grade market making system, we found that for active market makers, most of the hot path operations are simply updating the mid prices and shifting the book. Here are some live stats showing the frequency of most common operations for our system:
As shown, most of our operations is simply updating the mid prices and recentering the book. This may differ for you depending on your strategy and risk set up.
Apart from hyper efficient order cancellations and updates, some more information on maker book that may be of interest for most market makers:
Each maker book can have a maximum of 16 bid levels and 16 ask levels.
When taker orders are processed, Archer's matching engine aggregates levels from all maker books and creates a unified order book for filling takers with price priority and pro rata execution. More info here.
Each maker can optionally mention a delegate address, who can run maker operations on behalf of them. Delegates can do everything on a maker book (order cancellations, updates etc.) apart from depositing or withdrawing funds.
Maker books also have a parameter called sync_spread_ticks that allows makers to automatically widen their levels by that many ticks, for all atomic and synchronous swaps. 99% of the toxic flow and adverse selection comes from atomic swaps, this gives market makers a way to serve that flow but with added protection and earning higher spreads. More info on hybrid markets can be found here.
Find more information on best practices and general notes here.
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