What Does This Mean for Me?
For most participants, the short answer is very little. You might notice that some prices which were displayed in the past are no longer shown/acceptable.
Please note that this change only applies to the underlying values which are accepted by the program — you can always view prices in whichever format you’d like on the application (Probability, Decimal, or American).
If you trade algorithmically, or operate within a lot of precision when placing orders, you may need to adjust your approach to allow for Decimal bucketing schema.
What are ‘Ticks’ and Tick Bucketing?
Tick size, also referred to as a price increment, is the minimum price movement possible within a given market.
In traditional financial markets, this tends to be a fixed interval. However, in betting/prediction markets, greater precision is required for very low/high probability markets — so price increments are tiered.
When placing an order on app.aver.exchange or interacting with the Aver protocol via the SDK, you’ll notice a slight price change before the order is posted. This is a result of Tick Bucketing, which is the process of adjusting prices to align to a specified set of price increments.
Simply put, tick bucketing is the process of rounding odds to acceptable price increments.
What is a Tick Bucketing Schema?
A tick bucketing schema dictates which prices and price increments are accepted by Aver exchange.
In the Probability schema, prices are ‘round’ in Probability terms, but may not necessarily appear ‘round’ when converted to Decimal format.
These odds are in Probability format:
0.3, 0.31, 0.32
They are all acceptable ‘round’ values — but when converted and displayed in Decimal format they don’t appear so ‘round’:
3.3333, 3.2258, 3.125
The same situation arises in reverse, as a result of the move to Decimal-centric sports markets — i.e. price increments that appear ‘round’ in Decimal format may not be when viewed in Probability format.
Why do Prices Need to be Adjusted?
If a tick bucketing schema wasn’t enforced, it would be possible for any value to be entered in an order.
Consequently, order books would be chaotic without price consistency, and traders would spam exchanges to outdo one another by infinitesimally small price movements.
Tick bucketing has evolved to ensure a degree of standardisation in the structure of orders on the order book and prevents participants from losing out due to a small change in price.
Why did we Make This Change?
Aver was developed as a generalised protocol to serve both predictions and sports markets.
Originally, everything was developed to be probability-centric. Sports betting markets on Web2 (and on some Web3) exchanges have more typically used a Decimal-centric approach, and it’s clear from community feedback that this price schema is preferred for sports.
Prediction markets will continue to follow probability tick bucketing.