propAMMs compete for flow in close to perfect competition. Aggregators route each
order to whoever shows the best price, with no relationship or negotiation to fall
back on, so a maker that quotes wide loses the flow instantly. The only thing
standing between a market maker and the flow is the quality of their code and the
tightness of their price. Nothing like this exists on centralized venues, where the
right to provide liquidity is gated and intermediaries extract rent at each step.
A propAMM only competes if its quotes can be discovered. Aggregators turn
fragmented propAMM quotes into a single best bid and offer, routing each order to
whoever shows the best price and splitting a single order across several propAMMs
to hit each one’s top-of-book liquidity. The effect mirrors what Reg NMS built for
US equities with the National Best Bid and Offer, but achieved through routing
rather than mandate.
