Hey Jeff,

Sorry, just saw your message!

Yes, we act as counterparty to every trade on the platform. I should have also added added that we hedge all our risk in the market. So we have no directional exposure whatsoever. In that sense, we follow the classical broker dealer model.

We chose the broker dealer model because the value proposition of LN Markets is on instant trading, straight from your wallet, and we wanted to ensure no liquidity issue, which could be the case when you bootstrap an exchange. However, we have sufficient liquidity on our platform to think about moving to an order book model, a move we might make later.

What do you mean by "It can also work longer, if you're structurally padding contract prices with an arb-like pricing spread in your favor. If you're doing this, the internet will catch you eventually and it could end your business when you least expect it." ?

Does that make sense to you? Thanks for your concern and sure, we would be happy to arrange a call to discuss further.

All the best, Romain