Market Maker Protections on Derive

The Derive API provides three complementary protections for market makers trading large amounts programmatically:

1. MMP config — auto-cancels quotes and freezes trading when fills breach configured thresholds within a rolling window.
2. Cancel on disconnect — automatically cancels resting orders if the WebSocket connection drops.
3. Open-orders margin efficiency — orders marked mmp=true receive tighter margin calculations that respect the MMP limits.

Combined, these give a market maker a network-level, fill-level, and margin-level safety net against unexpected outcomes.

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MMP config

MMP config is a subaccount-wide setting that sets max amount or delta limits per currency for each subaccount. The matching engine blocks orderbook crosses that would breach these limits, provided:

• The mmp field is set to true on private/order (or on the RFQ quote), and
• MMPs have been turned on via private/set_mmp_config.

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Three benefits to using MMP

For the full V3 configuration model, field definitions, and the set_mmp_config, get_mmp_config, and reset_mmp methods, see:

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Cancel on disconnect

Cancel on disconnect (COD) is a wallet-wide setting that forces the WebSocket servers to cancel all standing orders when a connection drops. It complements MMP:

• MMP reacts to fills breaching your thresholds.
• COD reacts to losing the session entirely.

Both are recommended for programmatic market makers.

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Open-orders margin

Limit orders that stay open in the book require the account to hold extra margin to cover them if they were to get filled. The orderbook backend inspects the account’s open orders [order_1, order_2, ...] and finds a “worst subset”: the set of orders that, if filled, leads to the smallest initial margin possible. When performing those simulated fills, the backend takes into account the premiums paid or received for option bids and asks and the current positions owned by the account. Example. Suppose the open orders and positions are:

• Orders: [bid 10 perps @ $1999, ask 100 perps @ $2001, bid 10 1w calls @ $55, bid 5 2w calls @ $75]
• Positions: [long 90 perps]

The backend groups the orders by delta and/or vega sign and concludes that [bid 10 perps @ $1999, bid 10 calls @ $55, bid 5 2w calls @ $75] is the worst fill scenario. The open-order margin for these orders is then calculated by finding how much extra initial margin the account would require if those orders were filled. For every new open (non-crossing) order arriving at the orderbook, the risk engine checks that the sum of current initial margin and the open-orders margin is non-negative. In other words, new orders are accepted as long as the account can honour the worst-fill scenario. The private/get_subaccount endpoint can be used to check which orders have been flagged as “worst subset” and how much open-orders margin they require.

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MMPs and open-orders margin

Portfolio-margin market makers often quote hundreds of assets at once. With tight MMP limits it is impossible to be filled on all quotes simultaneously, so requiring margin for very large subsets of orders would be unreasonably capital-inefficient. For portfolio-margin accounts, the process of finding the worst subset is constrained by the account’s MMP settings. When MMP amount limits are enabled, the worst subset is reduced to an orders subset that can be filled subject to staying within the MMP amount limit. The reduced subset cannot be smaller than 2 distinct assets: the smallest possible open-orders-margin requirement still enforces that the market maker can honour at least 2 fills on two of the worst assets they are quoting. Using the example above, if the MMP amount limit is 3, the worst subset excludes bid 5 2w calls @ $75 and consists of [bid 10 perps @ $1999, bid 10 calls @ $55], because at least 2 assets must be fillable. If the MMP limit were high enough (e.g. 30), the subset would remain unchanged.

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Managers and risk universes

Portfolio-margin behaviour, including which assets an account can hold and how open-orders margin is calculated, is set by the account’s manager and risk universe. See the Managers & Risk Universes reference for how to pick the right manager for your strategy.

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