What it does: Temporarily widens the bid-ask spread when concentrated one-sided flow is detected; decays back to steady state (underlying market spread) once pressure subsides
November 21, 2025
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4
min read
Last Updated: April 1, 2026
Ostium’s mission is simple: to act as a gateway to global markets, bringing perpetual swaps to a wide swathe of traditional assets in need of a simple, transparent, leveraged trading instrument. To date, Ostium has delivered onchain access to many of the world’s largest and most liquid markets, from major indices, FX pairs, commodities, to single-name equities. These are incredibly liquid markets: trading volume in the underlying spot markets for these assets is in many cases north of a billion dollars per day.
Many of you have asked for more assets – and we’ve delivered! In the last month alone, we’ve listed crypto stocks like COIN, HOOD, GLXY, and CRCL, digital asset treasury companies like BMNR and SBET, and alts like HYPE and TRX. But these lower-liquidity assets present new challenges.
Expanding the breadth of assets can present risks in lower-liquidity markets, where Ostium’s default quoting system — which quotes bids and asks from the top of the book from the most liquid venue — can begin to fall short. Prices need to capture the real cost and liquidity depth. Artificially quoting a price from the top of the book when that very trade would have moved through the book, affecting execution price, exposes the protocol and LPs to undue risk. Less liquid markets and assets with open interest caps that can support trade sizes in excess of the size that can be cleared at the top of the underlying’s book must be subject to dynamic spreads.
One of Ostium’s core tenets is that of importing the liquidity conditions of the most liquid market to Ostium. Rather than recreating an orderbook for traditional asset perpetuals natively onchain – effectively re-building what are the largest and the most liquid markets in the world onchain, to the detriment of the user experience – Ostium pulls in aggregated underlying market pricing directly. As a result, Ostium is able to support large directional trades often orders of magnitude larger than what any other onchain platform can support. The proof is in the pudding: Ostium traders frequently execute massive bulk trades, like this single-shot $24M Nasdaq short, or this $20M Gold long.
While this system has worked exceptionally well for very liquid markets, it does not perform to our standard in less liquid ones. A $40M Nasdaq trade can easily be cleared at the top of the book in the underlying during liquid market hours, but a $40M trade on Solana? Less so. The less liquid the asset, the smaller the size that can be cleared in the underlying at the top of the book spread that Ostium quotes.
To address these structural limitations in thinner markets, Ostium needed a solution: a way for quotes to price in the impact of a trade’s size, not on Ostium (which has no orderbook), but in the underlying market. In the absence of L2 or L3 orderbook data, which remains difficult to mitigate spoofing risks and access in a consistent and similarly structured way across assets, the most elegant solution is one that mimics the underlying market orderbook dynamics. An important distinction vis-a-vis other known dynamic spread implementations is that Ostium’s implementation does not charge users for increasing open interest skew, but rather only for very short-term buy or sell pressure in one direction or the other. It features a dynamic decay function back down to steady state (the underlying market’s spreads), mimicking the price dynamics of an orderbook.
These dynamic spreads are Ostium’s adaptive execution system designed to balance fair pricing for small traders with realistic impact costs for large or one-sided trades, all while protecting LPs from exploitative activity. They mirror how liquidity behaves in real markets, charging a small, temporary spread only when the system detects concentrated flow on one side. Without this, traders could potentially move the underlying market and exploit LPs. This ensures that trading on Ostium feels as responsive as a live order book but remains stable, manipulation-resistant, and fair across all asset types.
Dynamic spreads operate in one of two clearly identifiable modes:
1. Zero Spread: executes at mids
2. Dynamic Component + Market Spread
Which mode an order falls under depends on the short-term directional skew of volume. Each trading pair has its own liquidity profile and defined threshold.
In simple terms, the threshold is the amount of short-term net trading activity that Ostium allows to happen in one direction before spreads start to widen. Think of the threshold as an asset’s neutral zone. If net activity falls within the threshold, this is akin to a balanced book. During this regime, Ostium quotes prices tighter than the underlying book: trades execute at mids with 0% spread. But if demand starts to stack up and that buy pressure exceeds the threshold, then the mode flips — buyers will pay the implied impact cost while sellers continue to execute at mid (0% impact).
Example: If the net effective threshold for Stock A = $1 M and the current buy pressure = $2 M, then up to $3 M in sell flow will execute zero spread (mids) while new buys will face the dynamic spread.
The dynamic spread passes through the underlying market spread, weighted by how far buy pressure has moved beyond the threshold and how large each order is within that excess. Smaller orders see little to no impact, while larger trades that add to one-sided flow face proportionally higher costs.
The spread decreases quickly at first, then tapers off back to the zero-spread state, mimicking the way volume would rebalance across an order book in the market. Until the net flow drops back below its threshold, impact may still apply to trades that increase the skew. Users can monitor this in real time through the “Simulated Spread” countdown directly in the UI.
Dynamic spreads are live with 20+ assets today, including all of our most recent launches: Crypto stocks like COIN, HOOD, GLXY and CRCL, DATS like MSTR, SBET and BMNR and all crypto pairs. Traders should expect to see this system expand to new long-tail assets. Existing TradFi assets on the platform are not currently subject to dynamic spreads.
Dynamic spreads are designed to help make trading on Ostium feel seamless while quietly solving the hardest aspect of synthetic market design: simulating real market impact without needing to recreate native order book liquidity on every asset. Small traders continue to trade at zero spread most of the time, getting clean execution even in thinner markets. Large directional flow pays when it should, in line with its true impact, protecting LPs.
Dynamic spreads open the door for Ostium to do much more, from hard-to-access long-tail assets to massive expansion in open interest caps on the most liquid markets. Read more on the applicability, components, and formula for price impact and execution logic in our docs [here].
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Dynamic spreads are Ostium's adaptive execution system, launched November 2025 and now live on 20+ assets. They temporarily widen the bid-ask spread when concentrated one-sided trading flow is detected, then decay back to the underlying market's spread. They do not charge for increasing open interest skew — only for short-term directional pressure imbalances.
For highly liquid assets like Nasdaq or gold, Ostium's top-of-book quoting handles large trades well. But for lower-liquidity assets (crypto stocks, altcoins, smaller equities), a large one-sided trade could exceed the size clearable at the top of book in the underlying market. Dynamic spreads price in this liquidity impact, protecting LPs from exploitation while keeping costs near zero for small and balanced trades.
Ostium's dynamic spreads uniquely do not charge users for increasing open interest skew. They respond only to short-term directional flow pressure and feature a dynamic decay function that mimics order book rebalancing. Trades that reduce the flow imbalance execute at zero spread.
Yes. The Ostium trading UI displays a 'Simulated Spread' countdown showing the current dynamic spread state and its expected decay in real time, so traders can assess execution costs before placing an order.
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