The pools, known in crypto as automated market makers, or AMMs, use rules to determine the price at which investors can buy and sell. More sophisticated versions can also allow professional trading firms to actively adjust prices and the amount of stock available, potentially making the market behave more like a conventional exchange.
TD Securities said these automated market makers, or AMMs, could take several forms. A conventional version, for example, would set prices using a mathematical formula based on the assets in a pool. But the bank thinks that more actively managed designs could matter more for stock trading.
“We see Prop AMMs and managed Multi-Pool Venues as much more consequential than conventional AMM models,” the analysts said, arguing that liquidity providers can actively adjust prices and inventory and are “less likely to be picked off by stale prices.”
Under that model, a market maker would set prices using market data and its own inventory, while another could combine several liquidity pools into a venue that resembles a traditional stock exchange.
That system is similar to the technology already used by decentralized crypto exchanges, but OKXICE plans to apply it to stocks. The trades would take place on XLayer, a blockchain developed by OKX, and the pools will use decentralized exchange Uniswap’s plumbing.
