Starting November 1 2024, Backpack will introduce Maker Rebates, and will amend the reward calculation methodology and liquidity KPIs for its monthly equity rewards program.
Overview
Market makers on Backpack are eligible for maker rebates based on their non-adjusted or adjusted maker share, as well monthly equity rewards from a pool of $390,000 across spot and futures.
To be eligible for this program, please reach out to us at vip@backpack.exchange
Market Maker Rebates
MM tiers can be reached either by Total Maker Share or Adjusted Maker Share, whichever is highest. The Adjusted Maker Share model rewards traders for providing liquidity on low liquidity markets. Each market has a multiplier (as presented below), which is used to calculate the Adjusted Volume.
To determine a user’s adjusted maker share, we take the sum of their adjusted maker volume across all markets over the past 30 days and divide it by the sum of the adjusted maker volume across the entire exchange.
MMs can also unlock MM tiers through their Total Maker Share, which does not factor in market multipliers. For Total Maker Share, we take the user’s total notional maker volume and divide it by the total maker volume on exchange.
MM Tier Calculation and Payout
On the last day of every month, we will calculate the Total Maker Share and Adjusted Maker Share for each user and choose the highest between the two to determine their MM tier / fees for the month.
Rebates will be credited manually to the user’s Backpack account the following month. In the meantime, users participating in the MM program will have their fee tier set to VIP4, which has 0 maker fees.
Market Maker Monthly Rewards
Backpack has allocated 5% of the company’s equity as of December 2023 to reward market makers that provide liquidity on the exchange, which nets to ~$390,000 in monthly rewards (using our latest valuation of $120m as of February 2024 ). 2.5% has been allocated to spot and futures each.
Spot rewards started on January 1 2024 and are slated to end on Dec 31 2024, while futures rewards will start once we launch futures on the exchange.
A user’s reward allocation is determined by their Blended Score relative to other market makers in the program. Market Makers that hit the optional Liquidity KPIs receive a 30% boost in rewards.
Initially, rewards within categories will be split equally among pairs. The full list of markets can be found here.
Scoring System For Monthly Rewards
To determine a user’s share of the overall reward pool, we will look at their Blended Score, which takes into account their Volume Score and Liquidity Score.
For each market:
- Volume Score = your maker volume / volume of all MMs in the program
- Liquidity Score = (your average size / your average spread2) / (sum of average size / average spread2 of all MMs in the program)
- Blended Score = (Volume Score * Volume Weight) + (Liquidity Score * Liquidity Weight)
- Reward = Blended Score * Monthly Reward Pool
Volume Score will have a weight of 0.7 and Liquidity Score of 0.3.
Liquidity KPIs / Rewards Boost
MMs that maintain the liquidity KPIs for at least 80% of the month will be eligible for a larger share of the equity allocations than MMs that do not. MMs with > 80% KPI uptime will receive a 30% boost to their Volume Score and Size/Spread² on the relevant pairs, which will be taken from the pool of MMs with < 80% KPI uptime.
Examples
Further Information
- All new MMs will enjoy MM5 maker fees for 60 days; thereafter, fees will be determined based on the user’s market share and volumes at the end of the fee holiday period. Backpack Exchange does not, and will not entertain special fee deals with any MM. Fee schedules with all MMs are the same.
- MMs participating in this program are not able to participate in other programs.
- MMs must receive at least 1% of the total allocation in order to be eligible for equity rewards in a given month.
- For the liquidity score calculation, we will only consider orders placed within 100bps of the mid.
- For a limited time, each MM has the option to have Backpack buy back the awarded equity every month at the previous fundraise valuation ($120m as of February 2024). If a market maker wishes to receive their month’s reward in cash, the market maker must let Backpack know before the end of the following month. In other words, a MM has until November 30 to state how they want to receive their October rewards. Previous equity rewards that have not been claimed in cash cannot be converted.
- MMs must comply with Backpack Exchange's User Agreement and all applicable policies and procedures.
- Backpack Exchange reserves the right to waive certain KPI requirements for a certain period of time in its sole discretion.
- Backpack Exchange reserves the right to modify this program any time when appropriate.
Do you have questions or require further information?
Click the red Live Chat button in the lower right of your screen or contact us via email at: support@backpack.exchange
Learn more about Backpack