Market Maker and Liquidity Provider Supplement
Updated: 9 May 2026
Table of Contents
1. Status of this supplement
1.1 This Market Maker and Liquidity Provider Supplement forms part of the Trading Rules incorporated into the Terms of Use.
1.2 This supplement applies to Affiliate Liquidity Providers, unaffiliated market makers, liquidity providers, RFQ participants, API users, quote providers, and other participants that provide or attempt to provide liquidity through or in connection with the Application or Derive Protocol.
2. Responsibility for systems and quote engines
2.1 Market makers and liquidity providers are responsible for the design, testing, configuration, supervision, operation, monitoring, maintenance, and performance of their own quote engines, pricing models, hedging systems, APIs, algorithms, bots, agents, systems, employees, contractors, service providers, and controls.
2.2 Market makers and liquidity providers must maintain appropriate pre-trade and post-trade controls, rate limits, kill switches, error controls, position limits, inventory controls, max loss limits, max delta limits, market maker protection settings, and supervision to prevent erroneous, unintended, excessive, stale, disruptive, malformed, manipulative, or disorderly quotes, RFQ responses, orders, cancellations, messages, or transactions.
2.3 Market makers and liquidity providers must promptly disable or restrict any API key, session key, quote engine, pricing model, bot, algorithm, system, or service provider that is malfunctioning, producing erroneous activity, creating disorderly trading, or otherwise creating risk to users, the Application, the Derive Protocol, market integrity, settlement, liquidation, or orderly operation.
2.4 Market makers and liquidity providers are responsible for ensuring that their systems, APIs, quote engines, and pricing models maintain reasonable connectivity to prevailing market conditions, external reference prices, comparable venues, and available oracle data at the time quotes or RFQ responses are submitted. A market maker or liquidity provider may not rely on a failure of its internal systems to monitor or incorporate external market data as a basis for challenging a Mistrade or Erroneous Transaction determination where the relevant quote was materially disconnected from prevailing market conditions.
3. Market maker protection tools
3.1 We may make available market maker protection tools, RFQ controls, quote limits, max quantity limits, max delta limits, max loss limits, quote exhaustion limits, kill switches, market suspension tools, API throttles, and other controls.
3.2 Market makers and liquidity providers remain responsible for all quotes, RFQ responses, orders, API messages, algorithms, systems, bots, agents, and service providers used through their accounts, whether or not any market maker protection tool is available, enabled, disabled, triggered, delayed, unavailable, incorrectly configured, or fails to operate as expected.
3.3 A market maker or liquidity provider may not rely on the availability, non-availability, operation, non-operation, setting, triggering, or non-triggering of any Application-level or protocol-level protection as a guarantee that erroneous, unintended, excessive, stale, or loss-making quotes, RFQ responses, orders, or transactions will be prevented, cancelled, adjusted, or reversed.
4. Notification and cooperation
4.1 Market makers and liquidity providers must notify us as soon as reasonably practicable and, where possible, within 60 minutes of becoming aware of any actual or suspected pricing error, quote engine malfunction, API malfunction, system issue, stale quote, excessive activity, market maker protection issue, Mistrade, Erroneous Transaction, settlement issue, margin issue, liquidation issue, or other matter that may affect market integrity or orderly operation. Failure to notify within this period may limit the remedies available to the market maker or liquidity provider in connection with the relevant issue.
4.2 We may require market makers and liquidity providers to provide information about quote logic, controls, testing, supervision, trading purpose, beneficial ownership, hedging, risk management, system status, and relevant records where we reasonably consider this necessary for market integrity, legal, compliance, security, settlement, liquidation, or operational purposes.
5. Restrictions, suspension and cost allocation
5.1 We may suspend, restrict, throttle, limit, disable, or condition market maker or liquidity provider access, RFQ access, orderbook access, API access, session keys, accounts, subaccounts, and access to markets, instruments, or transaction types through the Application and, where applicable, through protocol governance, risk parameters, or governance-approved processes where we reasonably consider this necessary or appropriate.
5.2 Where we reasonably determine, based on available evidence gathered in accordance with the Terms of Use and this supplement, that a market maker or liquidity provider causes or materially contributes to a Mistrade, Erroneous Transaction, market integrity issue, settlement issue, liquidation issue, or related issue, we may notify that market maker or liquidity provider in writing of our determination and seek reimbursement of reasonable, documented fees, costs, losses, administrative charges, settlement payments, or other amounts arising from or relating to the issue, review, corrective action, or voluntary resolution. Any right to seek reimbursement under this section 5.2 is a contractual right and does not constitute a regulatory fine, penalty, sanction, or enforcement action. We will provide the market maker or liquidity provider with reasonable supporting evidence of the amounts claimed and a period of not less than 10 business days to respond before pursuing any claim.
5.3 We do not insure or guarantee any market maker or liquidity provider against losses caused by its own quotes, RFQ responses, orders, pricing models, hedging systems, algorithms, APIs, systems, employees, contractors, service providers, or controls, including where such losses result from or are exacerbated by the operation, non-operation, or unavailability of any Application-level or protocol-level risk mechanism, insurance fund, security module, or market maker protection tool.
