Binance Draws Line on Market Maker Behavior With Public Red Flag Guide

Binance published a market-maker guidance framework outlining red flags and setting expectations for token projects working with liquidity providers.

The framework identifies six specific behaviors that signal elevated risk. These include:

• Token sales that break from the agreed-upon token unlock schedules
• Persistent one-sided sell orders without matching buy-side activity
• Repeated sell-side pressure with little or no corresponding buy activity
• Simultaneous large-scale deposits or selling across multiple exchanges
• High trading volume with minimal price movement, suggesting wash trading
• Sharp price swings caused by shallow order books or thin liquidity
• Trading volume is unsupported by real order book depth

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Binance also outlined clear expectations for token projects at listing. Teams must report their market maker’s identity, legal entity, and contract terms to the exchange.

Agreements with market makers must define roles, trading parameters, and compliance safeguards. Moreover, token loan agreements must specify permitted uses.

“Profit-sharing models and guaranteed profit models with MMs are prohibited, and token loan agreements should clearly define the permitted use of tokens,” the blog read.

The exchange further stated that it continuously oversees market-making operations to uphold rigorous standards and will respond quickly and firmly to any violations. This includes permanently banning market makers found breaking its policies, as safeguarding users and ensuring a fair, reliable trading ecosystem remains its top priority.

Meanwhile, the publication lands months after the October 10 flash crash that wiped out roughly $19 billion in leveraged positions across crypto markets, with many accusing Binance of alleged manipulation. 

Nonetheless, Binance denies any wrongdoing. Former Binance CEO Changpeng “CZ” Zhao also called accusations that the exchange caused the crash “far-fetched.”

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