Curriculum·S201 Market Structure and Price Formation·about 31 min
Who is on the other side
By the end of this lesson you can
- →Name the five participant types you trade against and what each one is optimizing for
- →Explain why the counterparty on any given fill is usually the party who wanted it more
- →Identify the structural advantages a counterparty can hold that are invisible from the interface
- →State your own edge in a sentence, or conclude honestly that you do not have one
Sophomore · enrolled learners
This lesson opens with Alameda's exemption from the FTX liquidation engine.
- What happened
- Court filings and regulatory complaints arising from the FTX collapse established that Alameda Research, an affiliated trading firm, had been exempted from FTX's automatic liquidation engine. The exemption was implemented in the exchange's own code by several means, and a software change made in mid-2020 allowed Alameda to hold a negative balance and withdraw funds it did not have, a capability available to no other account. Regulators described the resulting line of credit as effectively unlimited, with figures reported in the tens of billions. Other users trading on the same venue, in the same books, were subject to liquidation on the ordinary terms.
- The decision point
- Nothing on the interface distinguished this counterparty from any other. Every trader on that venue could see the book, the price and their own position, and none of them could see that one participant was operating under different rules in the same market. The information that would have changed how they sized and hedged was in the exchange's source code.
What you will be able to answer
- →Name the five participant types.
- →Who is usually on the other side of your fill?
- →What advantages are invisible from the interface?
- →What is the honest test of an edge?
Orientation and Year One are open: anyone can read them without an account. From Year Two onward the lessons are for enrolled learners, because progress through the later years only means anything if it is tracked against a record.
It is free. We do not sell the list and there is nothing to buy at the end of it.
Sources and review
- https://www.cftc.gov/media/8226/enfsinghcomplaint022823/download
- https://cointelegraph.com/news/alameda-had-unfair-trading-advantage-special-access-to-ftx-funds-cftc-filing
- https://www.axios.com/2023/10/10/ftx-sbf-gary-wang-trial
- https://www.coindesk.com/research/market-spotlight-the-19-billion-liquidation-that-shook-crypto
Confidence high·Volatility medium·Reviewed 2026-08-05·Owner unassigned
Contested
The details of Alameda's exemptions come from regulatory complaints and from testimony in criminal proceedings. Describe them as established in those filings and testimony rather than asserting operational specifics beyond what the filings support.
This lesson describes participant categories and structural advantages, and it deliberately makes no claim that any current venue operates this way. Do not let a revision imply that a named venue has undisclosed privileged participants without a source that establishes it.