Limit Order Book Market Making

This project implements a limit order book matching engine and a market maker agent in Python. The limit order book matching engine runs on a server that functions as an exchange and simulates a dynamic market environment by processing randomly incoming limit orders, market orders, and optionally IOC or Post-Only orders. The resulting mid-price exhibits behavior similar to a Brownian motion. Meanwhile, the market maker agent continuously sends order requests to the exchange, placing quotes around the mid-price to provide liquidity and generate a steady profit. The agent adjusts these quotes to neutralize their inventory position and maintain a non-directional strategy.

How to Run

Make sure to have both Python (e.g., version 3.12.4) and pip installed. Open the root directory of this project in your terminal and run the following command to install all required packages:

pip install -r requirements.txt

Next, to run the simulation along with the market maker, run the following command:

python src/main.py

Finally, open the link to your local server (http://localhost:5001) in a browser to see the market simulation in action.

Project Structure

The project source code is structured as follows:

• src/orderbook.py: Contains the implementation of a limit order book matching engine.

• src/exchange.py: Contains the implementation of the market simulation server that runs the limit order book matching engine.

• src/marketmaker.py: Contains the implementation of the market maker agent.

• src/main.py: Runs both the market simulator and the market maker simultaneously.