Hi, this is Peter Zeitz, your friendly research fellow at 0x. I thought I would share some research I am doing on TEC processes. While there are a number of TEC designs that interest me, what I am most excited about right now is process called selective delay. I feel that selective delay has the potential to revolutionize crypto trading by delivering dramatically lower prices, more decentralization, more competition, lower trust requirements. Basically, selective delay is awesome and I’m so excited I needed to share right now even though the research doc is in a very preliminary form. The ideas are all there, but it is missing essentials (proper typesetting, a biblio rather than just links, correction of typos, improved style, better organization, etc…) Also it is a bit technical, so it may be difficult to understand. Post questions to help me learn how to preach the selective delay gospel to a broader audience.
Anyways, it is a public link so anyone can post comments. Your comments, questions, and feedback, will help me sustain my current level of enthusiasm through progressive revisions. I plan to write a greatly simplified and condensed version of this technical paper as a medium blog post. Simplifying things for digestion by non-experts is much more difficult than it sounds and your questions help illuminate the best way of doing this.
I will update the link with newer versions as I progress with revisions.
Abstract: Asset markets utilize a wide variety of trade execution pro-
cesses. While the continuous limit order book is by far the most familiar to
traders on crypto exchanges and equity markets, it may not be the best
suited for the development of decentralized exchanges. In this paper, I
evaluate an alternative trade execution process called a selective delay
limit order book. Selective delay is the dominant execution process in the
foreign exchange market and has recently been making inroads among
equity exchanges in the US and Canada as well. The selective delay limit
order book is identical to the continous limit order book, except for one
simple tweak to order processing rules. Under selective delay, the trade
execution coordinator processes requests to create or cancel limit orders in-
stantaneously. However, requests to fill resting limit orders are subject to
a processing delay. This ensures that whenever a race occurs where tak-
ers seek to fill an order that the maker seeks to cancel, the maker always
wins. I explain how the application of this rule leads to a dramatic re-
duction in the equilibrium bid-ask spread, eliminates tendencies towards
concentration of market activity in large exchanges, eliminates risks of
exchange operators covertly trading against users, and facilitates mass
participation of traders in a unified global marketplace.
Preliminary 0x Research Paper on Selective Delay