Hare 2.0 How SFOX Made an Advanced Crypto Order Type Even More Advanced

by SFOX

What happens when an advanced crypto trading order type gets too good at what it does? You have to find a way to make it even better.

We’re excited to announce the launch of a fully upgraded Hare order type that can be either price- or speed-optimized, giving you access to crypto trade execution improvements only available on SFOX. Here’s the story of how and why we decided to take one of our oldest and most popular proprietary, smart-routing order types to the next level.

A Hare That’s Too Good at Hopping

We created our Hare order type to solve a problem that’s far too prevalent in crypto markets: the problem of penny-jumper bots. These trade bots are designed to automatically place small orders directly on top of the order book as soon as larger orders are put on the book, lowering the probability that other orders get filled and eating into their margins. If you’ve ever manually entered a trade on the top of an order book only to immediately see a tiny order (or two) jump on top of it, you’ve fallen victim to penny-jumper bots.

Hare is an advanced crypto order type that we specifically designed to circumvent bots without resorting to changing your limit price or taking from the order book. When you’re trading directly on a crypto exchange and a bot front-runs you, you don’t have any recourse; when you’re on SFOX, on the other hand, you have access to all major crypto trading venues from a single point of access — and that gives you the power to stop bots in their tracks.

Hare starts out like a regular limit order type — just set your price at which to buy or sell a cryptocurrency, and submit your order — but it’s got a lot more horsepower behind the scenes that leaves bots in its dust. If you use SFOX’s Hare order type to buy or sell a cryptocurrency like BTC, your order will automatically be routed to the best available exchange on our integrated order book. If a bot tries to front-run your order, though, Hare will do what hares do best and “hop”:

  • If the exchange your order is on still has the best price, Hare will hop up to automatically match the bot’s price (as long as that new price is better than or equal to your limit price).
  • If another exchange is now showing an even better price, Hare will hop to that other exchange instead, allowing your order to fill faster than it would on the original exchange, capturing maximal price improvement in the process.

Hare’s one of our most popular advanced crypto order types because it works really well: on average, Hare provides our traders with 24 bps outperformance vs. their limit price—annualized, that’s 11.52% outperformance if you trade once per week, and 86.40% outperformance if you trade once per day (compared, in each case, to placing limit orders at the same price). We were thrilled to be able to provide our traders with this kind of unparalleled edge, but it came with a price: traditionally, Hare orders are so conservative that they sometimes take a longer time to fill in order to deliver the best possible price.

Calculations of Hare order type past performance vs. limit orders placed under the same conditions. See Appendix for calculation details. Past performance does not guarantee future returns.

Some traders may be willing to wait longer in order to get further price improvement on their orders, but sometimes, you might want to have a way to trade faster without resorting to making rather than taking — especially when the market is moving away from your limit price.

So, we built that option for traders — and that’s how Hare 2.0 was born.

A Brand-New Hare Style

Starting today, SFOX traders have the option to use two different versions of the Hare order type: price-optimized or speed-optimized. To choose the version you want to use, just select “Hare” from the “Advanced” order types tab in the SFOX Pro Trader UI and choose “Optimize for Price” or “Optimize for Speed” from the new “Additional Options” field. (“Optimize for Speed” is the default selection.)

Price-Optimized Hare is business as usual: it places your order on the exchange with the best price, fights bots to execute, and hops to other exchanges if the price is better, sacrificing speediness to deliver the maximum improvement on your limit price.

Speed-Optimized Hare flips the script by routing orders to the exchanges with the tightest spreads, which is where top-of-the-book orders tend to fill most quickly. On average, the speed-focused Hare order type fills about 3 times as quickly as price-optimized Hare, and it still improves on traders’ limit prices — though it may not deliver the same improvement as price-optimized Hare.

When to Use Each New Version of Hare

Hare is a post-only order — it places limit orders on an exchange’s order book and waits to be filled — which means that its performance dynamics may differ based on whether the market is moving away from your order or toward your order. With that in mind, traders may want to take market conditions into account when deciding which version of Hare to use.

If you believe that the market is moving away from your order, consider speed-optimized Hare. Its enhanced speed may improve price execution by filling your order before the market moves away from it too much (e.g., completing your BTC sell before the BTC price falls too much).

If you believe that the market is moving toward your order, consider price-optimized Hare. Its diligent hopping can theoretically improve on traders’ limit price even more when the market is moving toward your order, gradually executing in a process similar to short-term dollar-cost-averaging (e.g., gradually buying BTC as the price of BTC decreases).

On the other hand, if you think the market is fairly sideways, then the equation is even more straightforward: price-optimized Hare is the standard for beating your own limit price as much as possible, and speed-optimized Hare is the standard for getting your order filled as fast as possible — while still improving on your limit price in the process.

Advanced Crypto Order Types as Unique as Your Trading Strategy

Over the years, SFOX has set itself apart by providing traders with a wide array of order types that let them leverage our integrated order book to get the best trade execution possible for their unique needs. Whether you’re looking to trade large amounts of BTC quickly with minimal slippageavoid falling prey to iceberg orders, or bring tried-and-true TWAP orders to the crypto market in a reliable and systemic way, we have an advanced crypto order type for you — and they’re all powered by our best-in-class smart-routing technology to ensure your order is routed to the trading venue that offers the best possible execution.

Now, we’re raising the stakes. The upgrade of our Hare order type marks the next phase of evolution in crypto trading sophistication: we envision a platform that allows traders to customize their order types to a level of specificity that ensures they’ll get the very best trade execution no matter what their particular trade strategy is. We believe that once you experience this kind of trading system, you’ll be shocked that you ever traded any other way — and you’ll be embarrassed for the many trading venues that don’t offer these tools.

But don’t take our word for it: sign up for SFOX and see how our suite of tools — tools that have facilitated over $12 billion in transaction volume since our inception in 2014 — can transform how you trade crypto.

Appendix

Hare’s “average return outperformance” vs. limit orders. The analysis featured in this article and the accompanying graphic was conducted by analyzing the prices at which 282 Hare orders executed, compared with the prices set as their limits, between 2/1/2020 and 5/1/2020. Return outperformance was calculated using the following formula.

Hare average return outperformance vs. limit order = absVal[(Volume-weighted average price of order) — (Limit price of order)]/(Limit price of order)

The arithmetic mean of this analysis was 24.0 bps. The median value was 2.5 bps; the 25th percentile value was 0.0 bps (rounded), and the 75th percentile value was 11.2 bps.

The above references an opinion and is for informational purposes only. It is not intended as and does not constitute investment advice, and is not an offer to buy or sell or a solicitation of an offer to buy or sell any cryptocurrency, security, product, service or investment. Seek a duly licensed professional for investment advice. The information provided here or in any communication containing a link to this site is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or which would subject SFOX, Inc. or its affiliates to any registration requirement within such jurisdiction or country. Neither the information, nor any opinion contained in this site constitutes a solicitation or offer by SFOX, Inc. or its affiliates to buy or sell any cryptocurrencies, securities, futures, options or other financial instruments or provide any investment advice or service.

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