Passiveness

Passiveness determines how far limit orders are placed from the market price, balancing execution speed and price efficiency. A higher Passiveness value means the orders are placed deeper in the book, increasing the likelihood they will be filled passively (as a "maker") but decreasing the certainty of execution.

How It Works

• Higher Passiveness (closer to 1) – Orders are placed deeper in the order book, reducing urgency but improving price efficiency.

• Lower Passiveness (closer to 0) – Orders are placed closer to the best bid/ask, increasing execution probability but with a higher risk of adverse selection.

Considerations

Order Placements with High Passiveness

High Passiveness (e.g., 0.8) – Better Pricing, Slower Fills

• Orders are placed deeper in the book, reducing market impact.

• Suitable for large orders, minimizing execution costs in stable markets.

Order Placements with Low Passiveness

Low Passiveness (e.g., 0.2) – Faster Execution, Higher Fill Probability

• Orders are placed closer to the top of the book, increasing fill probability.

• Suitable for urgent trades, volatile markets, and short execution windows.

This setting allows traders to fine-tune execution behavior, balancing cost efficiency and execution speed based on market conditions.