Binance releases market-maker operating guidelines… “Strengthening market transparency and user protection”

Binance, a global virtual asset (cryptocurrency) exchange, on the 31st released market-maker operating guidelines to enhance market transparency and strengthen user protection.

The guidelines aim to preemptively identify potential market-disruptive conduct that may arise during market-making activities and to clarify management standards. Binance presented the role of market makers, along with risk signals (red flags) and operating principles that projects must follow. Market makers are market participants that provide liquidity by balancing buy and sell orders and improving the efficiency of price discovery.

The guidelines include six key red flags to watch for during market-making activities. Specifically, they cite: ▲selling that conflicts with a token issuance schedule ▲one-sided trading in which selling is repeated without corresponding buying ▲large-scale simultaneous sell-offs across multiple exchanges ▲abnormal trading volume disconnected from price movements ▲sharp price swings amid insufficient liquidity ▲an imbalance between trading volume and liquidity.

Binance also called for stronger pre-listing controls for projects preparing to list tokens. Projects must adhere to the agreed token issuance schedule, and sales or distributions that deviate from the plan are restricted. Trades that create excessive downside pressure, such as large-scale selling, are also deemed market-disruptive conduct and are subject to controls.

In addition, projects must transparently disclose to the platform the legal entity of any market maker they work with and the contract terms. Conduct that could lead to price manipulation or liquidity distortion is prohibited, and profit-sharing or guaranteed-return arrangements with market makers are likewise not permitted. It also emphasized that when entering into token lending agreements, the scope of use must be clearly defined.

Meanwhile, Binance continuously monitors trading data through its in-house market surveillance program. The system is designed to identify abnormal trading patterns and proactively detect and block potential market manipulation.

A Binance official said, “Market makers play a key role in liquidity and trading efficiency, but given their outsized influence, clear standards and accountability are required,” adding, “We will expand the provision of relevant information and insights so market participants can make rational decisions in a more trustworthy environment.”