10 Questions to Ask a Market Maker Before You Sign
Before signing any market making agreement, get plain answers on ten things:
the commercial model, who holds custody, exact venue coverage, depth and spread commitments, reporting, what happens in high volatility, unlock-date handling, what happens if an exchange flags your token, onboarding requirements, and exit terms. Below is each question, why it matters, and what a good answer sounds like, so you can tell a professional desk from a polished pitch.
We sit on the answering side of these calls every week at EchoTrade. Most founders ask about price and venues, then stop. The deals that go wrong were signed on exactly those two questions.
1. Is this a retainer or a token loan, and can I see the full terms in writing?
The model decides who carries the risk. A retainer is a fee with custody retained; a loan takes 0.5% to 2% of supply with an option attached. Both are legitimate, but they are different deals with different costs realized at different times. The full comparison is in retainer vs token loan.
A good answer: the model stated plainly, terms on paper before signature, and patience with your questions about the option clause if there is one. A bad sign: the structure only becomes clear in the contract, or resists plain explanation on the call.
2. Who holds custody of tokens and capital during the engagement?
Under a retainer, your capital sits in exchange accounts you own, accessed through API keys with withdrawals disabled, and you should know exactly which accounts and under what controls. Under a loan, the desk holds 0.5% to 2% of your supply outright until the term ends. The mechanics are in [whose accounts a market maker trades from].
A good answer: named custody arrangements, and clarity on what happens to inventory if the engagement ends early.
3. Which of my target exchanges can you actually quote on today?
Marketing pages list every venue a desk ever touched. What matters is live integrations on the exchanges in your listing plan. We quote on 90+ venues and we still answer this question with a list, because "90+" tells a founder nothing about whether their three target exchanges are on it.
A good answer: a specific list, and honesty about which venues would need new integration time. Coverage claims are checkable, so check them.
4. What depth and spread do you commit to, and how is it measured?
Exchanges write liquidity obligations into listing agreements: resting depth within 1 to 2% of mid price, spread ceilings, uptime. MEXC's published criteria, for example, cap the spread at 2% and require at least one trade per hour. Your desk's commitments should map to those numbers, venue by venue. This is the core of what crypto market making is.
A good answer: concrete figures per venue, in the same terms exchanges use. A bad sign: commitments expressed as trading volume. Volume is the easiest number to inflate and the one exchanges trust least.
5. What does your reporting show, and how often do I see it?
You should see spreads, depth and uptime against the agreed targets, venue by venue, and you should see them at least weekly. A monthly PDF with a volume chart is a marketing document.
A good answer: reporting is in place before the engagement starts, in the metrics that matter, with a human who can walk you through it. The format varies by desk; the existence of it should not.
6. What happens to my book in high volatility?
Launches, unlocks and market-wide crashes are when liquidity matters most and when weak arrangements quietly widen spreads and step away. On a typical launch day our desk assigns up to three traders to a single asset, because the first hours are where the book either holds or does not.
A good answer: an honest description of how quoting changes under stress, what stays committed and what adjusts, and an example of how the desk handled a volatile day. Desks that promise nothing ever changes are describing a book they have never run.
7. How do you handle unlock and vesting dates?
The market prices unlocks before they happen, often several days ahead. A desk that has your vesting calendar from onboarding can position inventory and set quoting parameters for the date; one that learns about unlocks from the chart cannot. What that preparation looks like is in [the first unlock after TGE].
A good answer: they ask for your unlock schedule before you ask this question.
8. What happens if an exchange flags my token in a compliance review?
Exchanges monitor listed tokens continuously, and falling below liquidity thresholds can trigger warning designations, trading restrictions, and eventually delisting. On faster-moving venues the gap between a warning designation and delisting can be a matter of days. This is the moment your market maker matters most, and most founders never ask what the desk actually does when it happens.
A good answer: a concrete description of the process: how the desk reads the exchange's requirements, what changes on the book, and how it communicates with the exchange during the review. Desks that have been through it can describe it; desks that have not will change the subject.
9. What do you need from us to start, and how long until the book is live?
Integration, account setup, capital transfers and quoting configuration take four to six weeks on any competent desk, and the answer tells you whether the desk has an onboarding process or improvises one per client.
A good answer: a clear list (exchange accounts or API access, capital, your listing timeline, your vesting schedule) and a realistic timeline measured in weeks. Market makers should be engaged four to six weeks before the exchange application, so the onboarding clock matters more than founders expect.
10. What are the exit terms?
Term length, notice period, what happens to inventory and borrowed tokens at exit, and what an early termination costs. Loan-model deals in particular run to a fixed 12 to 24 month expiry because the option is the payment. Under a retainer, exit is one action: the project revokes the API key and the capital is already in accounts it owns.
A good answer: exit terms you could explain to your own investors without embarrassment.
The pattern behind all ten
Every question above is really the same question: does this desk operate in terms it will commit to on paper and report against honestly? Price matters, venues matter, but the deals that fail rarely fail on price. They fail on custody surprises, invisible option costs, and books that went quiet the week they were needed. The common thread is incentives, and the fastest way to read a desk's incentives is to understand how market makers make money. Ten questions, one call, and most of that risk is visible before you sign anything.
At EchoTrade we would rather answer all ten before a signature than renegotiate after one. Ask every desk on your shortlist the same list and compare what comes back.
FAQ
What is the biggest red flag when choosing a market maker?
Any promise to move or support your token's price. Legitimate market making is depth, spreads and uptime, not price outcomes; a desk promising price is offering manipulation, and the legal and exchange-relations risk of that lands on your token, not only on the desk.
How long does market maker due diligence take?
With the ten questions above, one or two calls per desk plus reading the draft agreement, so a week or two for a shortlist of three. Compare that against the term you are signing, usually 12 to 24 months, and it is the cheapest time your launch will ever spend.
Should I talk to more than one market maker?
Yes, at minimum two or three. The comparison itself is diagnostic: differences in how desks answer the custody, reporting and revenue questions tell you more than any single pitch.
When should I start these conversations?
Four to six weeks before your exchange application, not after listing. Most serious exchanges ask who your designated market maker is during review, and applications without an answer tend to stall.
Should I ask a market maker for client references?
Yes, and expect a careful answer. Most desks, including ours, do not name clients publicly, because a project's market making arrangement is commercially sensitive. What a desk can do is describe how it handled a specific situation, such as a compliance review or a volatile launch, in enough operational detail that you can tell it has done it before. Vagueness there is the signal, not the refusal to name names.
What does a good reporting sample look like?
Depth within 1 to 2% of mid price on each side, the spread, and quote uptime, per venue, over a period of at least a week. Ask to see one from an existing engagement with the client name removed. If the sample leads with trading volume, it is measuring the wrong thing.
Planning a listing?
We handle the market structure side: order book depth, spreads and uptime across 90+ exchanges. Tell us about your project before you submit the application, not after.