Binance tightens market maker rules, tells token issuers they must disclose partners

The guidelines ban profit-sharing and guaranteed return arrangements, aiming to prevent conflicts of interest and manipulative trading.

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What to know:

• Binance released new guidelines for market makers, requiring them to disclose their identity, contract terms and other information.
• The rules ban profit-sharing and guaranteed-return arrangements, aiming to prevent conflicts of interest and manipulative trading.
• Binance said it will monitor market maker activity and take action against misconduct, such as selling tokens in a way that clashes with release schedules or artificially inflating trading volume.

Binance, the largest crypto exchange by volume traded, released guidelines placing tighter obligations on token issuers and liquidity providers.

The new rules require projects to disclose their market maker's identity, legal entity and contract terms. They also ban profit-sharing and guaranteed-return arrangements, which the exchange said can create incentives that conflict with fair trading. Token lending agreements must clearly say how borrowed tokens can be used.

The rules are "intended to help projects conduct stronger due diligence on their market-maker partners and remind users to be mindful of market conditions," a Binance spokesperson said in an email. The company is looking to foster "a fair and efficient marketplace, and we do not tolerate misconduct."

The new policy targets a part of the crypto market that often works behind the scenes. Market makers usually post buy and sell orders to keep trading active and reduce sharp swings in price, which, in a healthy market, can help users buy or sell without major slippage, especially when a token is newly listed.

Binance said problems occur when firms act less like neutral liquidity providers and more like sellers with hidden incentives. The exchange flagged behavior such as selling that clashes with token release schedules, one-sided trading and activity that inflates volume without moving prices in a natural way.

In the blog post, Binance said it will take “swift, decisive action against any misconduct,” including blacklisting market makers. It’s unclear whether Binance plans to name the market makers it blacklists.

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