🏗️Architecture

Stella Trade's architecture combines the Central Limit Order Book (CLOB) framework with an advanced Just-In-Time (JIT) liquidity auction system, creating a high-performance decentralized trading environment. This hybrid model addresses the limitations of traditional DeFi trading platforms, offering a seamless blend of liquidity depth, capital efficiency, and competitive pricing.

Core Components

1. CLOB Base Layer The CLOB provides a foundational layer of liquidity, allowing traders to place limit orders that remain visible and accessible for takers. This ensures consistent market depth and transparency for all participants.

2. JIT Liquidity Auction Mechanism The JIT mechanism enhances the system's liquidity by enabling market makers to respond dynamically to trade intents with on-demand liquidity. This component minimizes capital inefficiency and allows for competitive pricing by leveraging market maker participation in real-time.

Market makers, also called solvers or relayers in intent-based systems, can participate in the JIT Blind Auction using two distinct methods:

1. Auction via Request-For-Quotes (Free Margin)

Market makers with available free margin can directly bid in the blind auction. This enables them to provide quotes that are more competitive than the existing limit order book, ensuring they have a chance to capture taker order flow with superior pricing.

2. On-Demand Margin Reallocation

For market makers with margin locked in limit orders across other markets, the system allows for on-demand reallocation. By removing existing placed orders, market makers can reallocate their margin to participate in the blind auction for incoming taker orders. This approach maximizes capital efficiency by dynamically adjusting liquidity allocation to match active order flow.

Just-In-Time (JIT) Auction Mechanism

Auction Process Overview

Market making on Stella Trade operates on an on-demand basis, leveraging a Request-for-Quotes (RFQ) system inspired by CoW Swap. This approach ensures maximum capital efficiency, as margin is allocated exclusively to active user order flow (takers). By eliminating unnecessary capital lock-ups, Stella Trade optimizes liquidity provision across multiple perpetual trading pairs, enhancing the flexibility and efficiency of market-making.

Order Matching

1. Trade Intent Submission The user submits a trade intent (order) via the trading interface. This is then relayed to the Stella Trade Matching Engine.

2. Broadcast to Market Makers The Matching Engine sends the trade intent to integrated market makers through the RFQ Module.

3. Intent Auction Market makers have up to 2 seconds to participate in the auction, responding with their best firm quotes.

4. Quote Evaluation and Matching The Matching Engine compares the received quotes with existing order book liquidity to achieve the most competitive pricing. Partial fills from multiple market maker quotes are possible.

5. Position Execution Once the best quotes are selected, the respective market maker’s margin is locked, and the trade is executed. Both market makers and the user are notified of the position opening.

In cases where a market maker's quote matches the order book price, the order book liquidity is prioritized. This incentivizes market makers to provide better quotes than those available in the order book.