The Nomisma Matching Engine

The Nomisma Matching Engine (NoME) is composed of discrete-time (periodic), uniform-price (one price per instrument per auction), double (orders submitted by buyers and sellers) frequent batch auctions that allow for the pooling of orders for different underlying instruments and payoffs and thus the utilization of multiple different sources of liquidity that normally clear in isolation from each other. The NoME, therefore, constitutes the foundation of a marketplace in which growth and liquidity generation are supported by NoME-intrinsic, multiple-sided network effects.

In the standard continuous order book methodology, price discovery for each instrument happens in the context of each order book as a silo, with “cross order book” or “cross instrument” liquidity delivered haphazardly and on an ad-hoc basis. The NoME is a mechanism for harnessing, in a systematic fashion, all market making tools and making them accessible to every market participant.

Optimal pooling of liquidity and executed volume is achieved by utilizing the Mixed Integer Programming (MIP) mathematical technique in conjunction with:

● Replication — utilizing standard put/call parity relationships to decompose/reconstitute all instruments into/from their constituent parts to achieve optimal solutions

● Conditional orders — enabling submission of orders composed of multiple legs, whose execution is dependent upon the execution of all legs simultaneously

The instruments for which the NoME allows for simultaneous price discovery can be categorized into the following, usually self-contained, marketplaces:

● A spot/ “short-term interest rate” market that allows for:

○ Orders in “high frequency trading (HFT)”-resistant spot markets (“Nomisma Spot”; NS )

○ Orders for swaps (buy NS / sell forward ; sell NS / buy forward) for specified maturities (and therefore “collateralized funding” markets)

○ Orders for simultaneous execution of NS delta against options in the derivatives market described below

○ Internally consistent determination of option settlement prices in the derivatives market described below

● A derivative market that allows for:

○ Orders for European puts/calls, put spreads/call spreads, binary options and barrier options

○ A funding market, which feeds conditional, riskless combinations of derivatives into the NoME order books

○ A credit-risky borrowing/lending market comprised of collateralized loan and margin loan markets, which determines endogenously the price of leverage per risk bucket as defined by a standard Credit Valuation Adjustment (CVA) model. The Nomisma platform also allows specialists to set up dedicated vehicles to industrialize margin loans and differentiate themselves via a pre-impairment loss cushion, margin loan riskiness, pricing methodology and their implied preferences (“axes” in market making parlance)

● A structured product interface:

○ A layer on top of the aforementioned derivatives market that allows users versed in the structured product markets to enter orders in structured product payoffs that can be statically replicated with European puts/calls, binary options and barrier options

Each entry point into the NoME can be translated into a white label collaboration channel, whereby partners can offer any variation of the payoffs and instruments priced by the NoME, including yield enhancement and leveraged products, to their users through their own self-branded user interface with the orders feeding into combined NoME order books.

On the Nomisma platform, NoME powered centralized matching is combined with Decentralized On-Chain Settlement to allow for the elimination of counterparty risk.

Users’ ability to leverage is provided by portfolio margining and the aforementioned margin loan market.

Further functionality includes a smart contract wallet enabling multiple user organizations to segregate responsibilities between different team members to enhance internal controls and a gateway for seamless fiat to USDC conversion and redemption.

Authors:

John Chew

Head of Trading at Nomisma Holdings Pte Ltd.

Dimitrios Kavvathas

Chairman of Nomisma Holdings Pte Ltd & CIO of Harmony Advisors Ltd.

About Nomisma:

Nomisma is an aspiring counterparty risk-free, regulatory compliant, digital asset spot and derivative trading platform. Nomisma is powered by innovative financial engineering; the Nomisma Matching Engine (NoMe), as well as self-custodial, smart contract based modular architecture. Nomisma is designed for institutional accounts and professional users.