🧮Dynamic spreads
Dynamic spreads are a per-pair execution mechanism that scales execution cost as a function of short-term order flow (buy and sell volume). This allows Ostium to support higher OI caps for less liquid assets.
Execution cost has two parts:
price impact = market spread + dynamic component
Market spread is always charged as the baseline.
Dynamic component is charged on top, based on short-term pressure and trade size.
For liquid assets like SPX or EURUSD, price impact is typically minimal compared to pairs like LINKUSD.
Modes: ON / OFF
OFF → price impact = market spread → executed at bid/ask
ON → price impact = market spread + dynamic component
Dynamic component
The dynamic component uses:
Initial volume: short-term buy or sell pressure before the trade executes
Trade size (USD): notional (collateral × leverage)
priceImpactK: a parameter extrapolated from the underlying market order book (based on L2/L3 data)
For a given initialVolume, tradeSize, and priceImpactK, the function returns the average price impact for that order size under those market conditions.
Short-term pressure and decay
Ostium tracks two independent pressure signals:
buyVolume (decays over time)
sellVolume (decays over time)
Decay velocity is approximated by a negative exponential. The UI displays how long it will take for buy/sell volume to decay.
Buy vs sell equivalence
Whether a trade uses buyVolume or sellVolume depends on the action:
Long
Buy
Sell
Short
Sell
Buy
Buy-equivalent: opening a long, closing a short
Sell-equivalent: closing a long, opening a short
Recommendations
Use slippage protection (always).
Split large trades into smaller chunks.
Wait between chunks so pressure can decay.
Monitor Simulated spread before sending the next chunk to avoid trading into peak pressure.
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