Frequently Asked Questions
Last updated Aug 31 2017
About EverMarkets
What is EverMarkets?
EverMarkets is a decentralized platform to trade equity, bond, and commodity futures using blockchain technology.
What are the benefits of EverMarkets?
Our mission is to revolutionize financial markets by making trading cheaper, easier, and fairer.
  • Cheaper. We intend to reinvent the roles of the broker, the clearing house, and the exchange. With fewer parties involved, we aim to cut the cost of trading dramatically.
  • Fairer. Markets are currently plagued by price discrimination. High frequency traders can make trades significantly cheaper than other traders can by using deep volume discounts, purchasing costly “membership seats”, or through a variety of other incentive packages. We want to level the playing field.
  • Global access. Markets around the world have different requirements to trade, and their own sets of rules. We want to standardize liquidity on a global platform and make it easy for anyone, anywhere, to access any market.
  • Real world contracts. We are not limiting ourselves to crypto currencies, and intend to create a legal way of trading contracts fungible with existing exchanges on our platform. By centralizing the legal and regulatory capital needed to get this done, but decentralizing the result, we hope to all the world’s liquidity.
  • Minimizing market impact. By innovating on the traditional microstructure of today’s exchanges, we look to create markets which are less volatile, less susceptible to market impact, and less reliant on speed for success.
  • Leverage done correctly. We will deploy a market-based approach to margin to make sure that traders are able to lever up their trades, but in a responsible and controlled way.
Why a decentralized exchange instead of a centralized one?
A decentralized approach has many advantages over the traditional centralized model which today’s exchanges employ.
  • Costs fall dramatically: lower switching costs. By focusing on creating an openly accessible platform, the barriers to offering liquidity fall dramatically. No longer will exchanges be able to wield monopoly power over their markets, as the switching costs for traders will be nearly nil. Demand will flow to contracts which are the most economical.
  • Global homogeneity. Our decentralized platform will attempt to unify access across global exchanges. Traders will no longer have to handle the bureaucracy of dealing with multiple exchanges.
  • Less affected by regulatory uncertainties. While regulation is an important part of keeping markets safe-- and we are vehemently against any type of illegal activity—we believe that there is room for innovation and experimentation, especially against antiquated regulations. For example, certain regulations may be illegal for traders in one country, but not for traders in another. We hope to find a path to trading that is both legal and progressive.
  • Impervious to any central authority. The beauty of a decentralized market is that it is uniquely immemorial in the face of uncertainty. We foresee free markets operating in the face of unstable regimes, war, or censorship. Decentralized markets are less susceptive to corporate drama, and can be maintained by a free network of individuals.
  • Transparent and auditable. With programmable smart contracts and an open source stance, our platform will be distinctly observable. Markets will be enforced by code, rather than courtrooms. Technical fallacies or errors will be in plain sight to all parties. Trades and accounts, with some caveats, will also be transparent, making it harder to lose customer funds and granting better protections.
Why do you need a new token? Why not just use ETH for all trading and margin activities?
Our token allows us to offer unique abilities for holders, and incentivizes the maintenance and growth of stable markets.

Token holders acting as administrators will directly impact market stability with how they set parameters. Holders who choose to participate as a lender in a margin syndicate, for example, can choose how leverage is offered and distributed. Intraday risk may be measured differently from overnight risk. Larger accounts may be given more leverage than smaller accounts. The same goes for matching engines. Contract specifications, price bands, arbitrators, and oracle choices are important aspects of how markets are governed

That being said, we are also considering the addition of ETH or other ERC20 tokens as collateral to decrease volatility or raise available collateral. The advent of central bank coins (cryptocurrencies backed by fiat reserves) could be monumental for our platform as well, as their usage as collateral could decrease cryptocurrency risk significantly.
What is your stance on legality?
We are well aware of the legal issues involved in an endeavor of this nature.

Despite being a decentralized system, it is not our intention to skirt the law. We have no desire to conduct or condone unlawful activities or subject token holders to prosecution. Our primary motivation is a reduction in cost and complexity for the benefit of all traders, without jeopardizing market integrity.

That being said, we do believe that it is possible to operate legally within this space. We are working with some very talented lawyers and legal advocates. We talk more about this in our white paper, and will announce even more shortly.
Trading Mechanics
whyauctions
You state that you use auctions for trading. Why is this a better mechanic?
Yes, our markets will settle using periodic pro-rata call auctions. This type of microstructure is very different from continuous style trading. While it is particularly well suited for a distributed platform in a technical sense, it also has many great economic properties which we believe will be advantageous to traders.

There are many proponents of using call auctions as an alternative to traditional markets. We summarize some of the main arguments here:
  • Frequent call auctions eliminate the speed advantage of the fastest liquidity taking traders.
    By making liquidity providers less susceptive to order “sniping”, the cost of liquidity provision would decrease and potentially lead to lower spreads and enhanced liquidity.
  • Call auctions are easier from an exchange implementation standpoint.
    Matching engines will no longer be affected by the instability resulting from periods of surging market data.
  • Regulators and market observers can better survey markets.
    By reducing the number of tradable time points, data will be simpler to visualize. With fewer speed-sensitive traders, liquidity providers will also cancel orders less frequently, decreasing the size of market data feeds.
  • Data dissemination will be more fair.
    Market events which publicize earnings or economic reports will not cause as much volatility if participants are all given adequate time to digest them before the market resumes.
  • Market stability will improve.
    Since orders in a periodic call auction model are not transacted immediately, liquidity providers will be given more time to fill supply-demand imbalances. “Flash crash” type scenarios will occur less frequently as a result, and the “market impact” of a large order will be decrease.
whyauctions
What order types will you support?
We have not yet finalized our order types, but we hope to support market orders, limit orders, and market imbalance orders at a minimum.
We are also experimenting with the opacity of our call auctions, and may support encrypted limit orders. These are orders whose price and quantity will not be visible to the matching engine until after an auction has crossed. This type of trading will have many ramifications on how imbalances are settled, and may decrease market impact significantly. We are still discussing how to best tackle this idea and will expand upon this concept in the future.
How will you address the fact that all transactions are public? For example, a perceptive trader may try to take advantage of other traders near their maintenance margins.
The openness of our platform is both a benefit and a hindrance. To protect traders who desire anonymity, we plan on introducing optional services which would obscure the origin of funds. Traders could use this to split up large orders into many smaller ones.
In our current design, margin information will need to be public for matching engines to determine the correct amount of buying power for a given account. Margin syndicates will need to take this into consideration for their pricing. We are still discussing potential improvements to this aspect of the trading process.
What effect do your auctions have when trading contemporaneously with existing continuous markets when the contracts are fungible / very correlated?
It is likely that market makers on both platforms will adjust their quotes to take into account the combined liquidity of simultaneous continuous and auction order books. This is not a new phenomenon, and already happens on markets like NASDAQ, where auction books exist alongside continuous trading books during the first five and last ten minutes of the day.
What happens if speculators drive up the volatility of your tokens, causing margin calls (similar to what happened to Bitcoinica)?
This is certainly a danger.
In the long term, we hope to alleviate this through the usage of more stable coin values. It could be that a larger user base increases the stability of our tokens, or that the release of fiat-backed coins makes it prudent to use those for collateral purposes.
In the short term, we have taken the following steps to mitigate:
  • An efficient token sale will help ensure that distribution is widespread, making it harder for any single actor to control a large portion of tokens.
  • We may deploy reserves (in fiat or in tokens) to help dampen volatility in secondary markets.
  • Our researchers will publish detailed guides on our token’s historical and predicted volatility. This will aid margin syndicates in properly pricing volatility.
What if the settlement prices on your system are wrong? Do traders have any recourse?
Yes, they do. As veteran traders, we have seen many instances where exchange prices are incorrect or trades have been broken by exchanges due to volatility. While some of these cases are due to exchange error, others are subject to interpretation. Asking "when is a price wrong?" is, in fact, not a straightforward question to answer.

Traders want to know that they are protected from glitches, but have recourse against subjectivity. We designed our system accordingly, and have an arbitration procedure which we expound upon in our whitepaper. This part of our system is still in its early stages and we welcome suggestions.
How will your system address common manipulative trading activities like spoofing, marking the close, or self-trade?
We believe our platform has been constructed to prevent many manipulative activities by design.

Spoofing refers to the practice of sending orders with the intention of fooling the market with disingenuous orders. A manipulative seller may, for instance, send a large number of dishonest buy orders, hoping to drive up the price of a market so he can sell at a local maximum, then cancel the buy orders afterwards.
Spoofing is nowadays very difficult to detect, even for seasoned regulators. Recent versions of this activity, from this author’s experience, can be quite layered: spoofers who want to sell may place buy orders in correlated securities, or even execute small buys at a loss, in order to trick other market participants.
Our system does a good job of protecting against spoofing because it only employs call auctions with random crossing times. Since the crossing time is not known in advance, a spoofer can more easily execute large amounts of orders inadvertently, in amounts likely enough to deter the practice. By de-emphasizing speed, we also make cancels less reliable, making dishonest orders even harder to pull out before executing.

Marking the close is when a trader places a large number of orders near the cross, hoping to set the closing price of a security.
This is something that our system can address in a few ways. Matching engines will be able to set price limits such that large moves right before a cross can extend the auction period. Arbitration procedures may be raised, and crosses compared against other markets. Finally, the fact that we have fewer but larger auctions will concentrate liquidity, making it more difficult to overwhelm.

Self trading is an activity where manipulators trade with themselves, artificially driving up volumes. This causes other traders to believe that a market is busier than it really is. This is forbidden in futures markets, but happens pretty commonly anyway -- up to 15% in some periods.
This is difficult to prevent due to the decentralized aspect of our system. While the matching engine can easily be programmed to prevent self-trades originating from the same account, malicious traders can spread their coins throughout multiple accounts which cannot be linked.
We are considering a few solutions which will be announced soon. You are welcome to drop by our slack channel to discuss.
Other Questions
It is our every intention to be forthright and transparent with the community regarding the design, advantages, and even shortcomings of our system. We welcome suggestions, praise, and even complaints.

If you have other questions which are unanswered by this faq or our whitepaper, please send us an email, drop by our subreddit, or stop by our slack channel. If your question is a particularly good one, you'll likely see it included on this page as well!