## 3.5 Implied Engine

The CoinFLEX matching engine has implied price functionality so that futures or spread orders in one book may be reflected in another associated book or books. This helps liquidity as it helps resting orders in one book to be reflected in another book, therefore an incoming taker order in Futures order book A may result in a futures order to be triggered in Futures book B via an implied Spread order book C. There are 2 types of Implied orders, namely Implied In and Implied Out.

### Implied In Orders

Implied In orders are when orders from an outright futures book are reflected in the spread order book. For example if Futures order book A is showing a bid at \$10,000 and Futures order book B is showing an offer at \$10,500, then this will be reflected as an Implied spread order offer at \$500.

#### Why is this spread offer shown by the CoinFLEX Engine?

This is as if a trader in the Spread book buys (lifts) this Implied Spread offer at \$500 then the Implied engine will automatically buy (or lift) the \$10,500 offer on Book B and sell (or hit) the bid at \$10,000 in Book A. This is exactly economically equivalent to trading the spread at \$500.

### Who benefits?

Anyone looking for liquidity. Implieds are a powerful way to link liquidity across different books as they result in multiple customers orders being executed together. In the example above, 3 customers have traded in a scenario where without Implied in Orders maybe only one order would have ordinarily traded.

#### How have 3 customers traded?

Customer 1 has got his/her bid in Book A filled, Customer 2 has got his/her offer in Book B filled and Customer 3 has purchased a futures spread at \$500 that they would not necessarily have the opportunity to trade without Implied In orders.

### Implied Out Orders

Implied out orders are where orders in the spread order book are implied out and reflected in the outright futures book. For example, imagine the following order books:

Book A: Bid \$10,000/ \$10,100 Ask

CoinFLEX’s Implied Engine can calculate and Imply Out a Futures price out into book B.

### How is the Implied Out Price in Book B derived?

If someone sells (or hits) the bid on Book B at \$10,500, then the CoinFLEX implied engine will buy this and sell (or hit) the bid on Book A at \$10,000. Thus the implied engine has legged (or traded) the spread at a price of \$500 and has filled a resting Customer Spread bid that was there at \$500.

Conversely if someone buys (or lifts) the offer in book B at \$10,650 then the CoinFLEX Implied Engine will sell this and buy (or lift) the offer in Book A at \$10,100. Thus the Implied Engine has legged (or traded) the spread at a price of \$550 and has filled a resting Customer Spread offer at \$550.

Again the powerful tool that Implied Orders bring is in creating 3 different Customer orders that are linked together, not only to create extra liquidity in linked order books but to also fill all 3 Customers where only one of the orders was initiated by a taker order.

### Spot Liquidity from Implieds

CoinFLEX’s Implied Engine plays a very important role in the spot order book. As CoinFLEX has the World’s first Physically Delivered Perpetual Futures, this can be linked with CoinFLEX’s Repo order book to Imply In to the spot book.

#### How do the Perpetual futures and Repo books combine with Imply In?

Buy 1 BTC spot and sell 1 Perp Future

If you then buy this short 1 Perp Future position back in the Perp order book then you are left with a 1 BTC spot position. So buying Repo and buying a Perp Future together is exactly the same as buy 1 Spot BTC.

Similarly, by selling Repo means you sell -1 BTC and +1 Perp Future. So if you then sell this long 1 Per Future in the Perp order-book you are left with the – 1 BTC spot trade.

#### Spot

Sell Spot = Sell Repo + Sell Perp

Implied In orders are created by the CoinFLEX matching engine by combining orders from both the Repo and Perp Futures order book to create orders in the Spot Book.

#### Implied In Orders

Futures outright orders are combined to show implied orders in the Spread books

#### Implied Out Orders

Spread orders are combined with one or more outright orders in the futures books to imply out orders into the other futures books.

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