{"status":"ok","message-type":"work","message-version":"1.0.0","message":{"indexed":{"date-parts":[[2026,8,14]],"date-time":"2026-08-14T15:26:51Z","timestamp":1786721211454,"version":"build-2736575974"},"posted":{"date-parts":[[2026]]},"group-title":"SSRN","reference-count":13,"publisher":"Elsevier BV","content-domain":{"domain":[],"crossmark-restriction":false},"short-container-title":[],"abstract":"<jats:p>Perpetual futures contracts dominate cryptocurrency trading, yet the widespread use of hidden order types (iceberg orders, reserve liquidity, and non-displayed depth) has outpaced formal market design. This paper develops a complete, implementable framework for designing perpetual futures markets with both visible and hidden liquidity. We extend the Kyle (1985) batch-auction model to two layers of depth and derive in closed form how equilibrium price impact, realised spreads, and post-trade reversion depend on the hiddento-visible ratio \u03ba. From the same primitives we derive informativeness I(\u03ba) and execution quality E(\u03ba) rather than assuming their shapes, and prove existence of an interior optimal \u03ba * maximising a weighted welfare function. Our central new result is that \u03ba * is state-dependent: under liquidation cascades, when the order-flow distribution becomes fat-tailed and price discovery is mechanically distorted, the welfaremaximising hidden ratio rises sharply. We supply a level-by-level implementation rule, a six-step calibration procedure using only public exchange data, and a conservative default \u03ba * = 0.5 for exchanges that cannot perform calibration.<\/jats:p>","DOI":"10.2139\/ssrn.6660119","type":"posted-content","created":{"date-parts":[[2026,4,27]],"date-time":"2026-04-27T15:28:16Z","timestamp":1777303696000},"source":"Crossref","is-referenced-by-count":0,"title":["Transparency vs. Liquidity Provision in Perpetual Futures Markets: A Market Design Framework with Hidden Liquidity"],"prefix":"10.2139","author":[{"ORCID":"https:\/\/orcid.org\/0009-0005-8477-9393","authenticated-orcid":true,"given":"Boon Chuan","family":"Lim","sequence":"first","affiliation":[],"role":[{"vocabulary":"crossref","role":"author"}]}],"member":"78","reference":[{"issue":"8","key":"ref1","doi-asserted-by":"crossref","first-page":"2096","DOI":"10.1093\/rfs\/hhs123","article-title":"Hidden and displayed liquidity in securities markets with informed liquidity providers","volume":"26","author":"A Boulatov","year":"2013","journal-title":"Review of Financial Studies"},{"issue":"8","key":"ref2","doi-asserted-by":"crossref","first-page":"2267","DOI":"10.1093\/rfs\/hhu032","article-title":"High-frequency trading and price discovery","volume":"27","author":"J Brogaard","year":"2014","journal-title":"Review of Financial Studies"},{"issue":"2","key":"ref3","doi-asserted-by":"crossref","first-page":"244","DOI":"10.1016\/j.jfineco.2016.02.002","article-title":"Dark pool trading strategies, market quality and welfare","volume":"124","author":"S Buti","year":"2017","journal-title":"Journal of Financial Economics"},{"issue":"10","key":"ref4","doi-asserted-by":"crossref","first-page":"3040","DOI":"10.1093\/rfs\/hhaf046","article-title":"Liquidity provision on blockchain-based decentralized exchanges","volume":"38","author":"A Capponi","year":"2025","journal-title":"Review of Financial Studies"},{"key":"ref5","author":"Trading Dydx","year":"2024"},{"issue":"2","key":"ref6","doi-asserted-by":"crossref","first-page":"577","DOI":"10.1111\/j.1540-6261.1992.tb04402.x","article-title":"Time and the process of security price adjustment","volume":"47","author":"D Easley","year":"1992","journal-title":"Journal of Finance"},{"key":"ref7","doi-asserted-by":"crossref","DOI":"10.1093\/acprof:oso\/9780199936243.001.0001","author":"T Foucault","year":"2013","journal-title":"Market liquidity: theory, evidence, and policy"},{"issue":"4","key":"ref8","doi-asserted-by":"crossref","first-page":"1127","DOI":"10.1111\/j.1540-6261.1994.tb02450.x","article-title":"Is the electronic open limit order book inevitable","volume":"49","author":"L R Glosten","year":"1994","journal-title":"Journal of Finance"},{"issue":"1","key":"ref9","doi-asserted-by":"crossref","first-page":"71","DOI":"10.1016\/0304-405X(85)90044-3","article-title":"Bid, ask, and transaction prices in a specialist market with heterogeneously informed traders","volume":"14","author":"L R Glosten","year":"1985","journal-title":"Journal of Financial Economics"},{"issue":"4","key":"ref10","doi-asserted-by":"crossref","first-page":"1001","DOI":"10.1017\/S0022109013000471","article-title":"Algorithmic trading and the market for liquidity","volume":"48","author":"T Hendershott","year":"2013","journal-title":"Journal of Financial and Quantitative Analysis"},{"key":"ref11","author":"Hyperliquid","year":"2024","journal-title":"Hyperliquid documentation: vaults and Hyperliquidity Provider (HLP)"},{"issue":"6","key":"ref12","doi-asserted-by":"crossref","first-page":"1315","DOI":"10.2307\/1913210","article-title":"Continuous auctions and insider trading","volume":"53","author":"A S Kyle","year":"1985","journal-title":"Econometrica"},{"issue":"1","key":"ref13","doi-asserted-by":"crossref","first-page":"321","DOI":"10.1111\/jofi.13405","article-title":"Decentralized exchange: the Uniswap automated market maker","volume":"80","author":"A Lehar","year":"2025","journal-title":"Journal of Finance"}],"container-title":[],"original-title":[],"deposited":{"date-parts":[[2026,8,14]],"date-time":"2026-08-14T14:27:34Z","timestamp":1786717654000},"score":1,"resource":{"primary":{"URL":"https:\/\/www.ssrn.com\/abstract=6660119"}},"subtitle":[],"short-title":[],"issued":{"date-parts":[[2026]]},"references-count":13,"URL":"https:\/\/doi.org\/10.2139\/ssrn.6660119","relation":{},"subject":[],"published":{"date-parts":[[2026]]},"subtype":"preprint"}}