How CEXs and MMs List Tokens

• When a centralized exchange (CEX) lists a token without directly receiving supply from the project, it often involves market-making agreements or external liquidity provisions.

• Market Makers (MMs): The exchange collaborates with third-party market makers who provide liquidity for the trading pairs. These MMs are often incentivized with rebates, trading fee reductions, or exclusive partnerships.

• Synthetic Liquidity: The CEX might use mechanisms such as synthetic liquidity, where they mimic order book activity without holding the actual token. This can create the appearance of a liquid market while the exchange or MM sources tokens over time.

• Why Futures First?

• Lower Capital Requirement: Futures markets don’t require direct custody of the token, as they are derivative products.

• Higher Profits from Leverage: Futures attract speculators, offering leverage for larger volumes and higher trading fees for the CEX.

• Market Making Profitability: By market-making in futures, the exchange or their partner MMs can earn profits from trading activity (e.g., through spreads or liquidation events).

• Dumping Tokens for USDT in Futures:

• If the project or its MMs hold a significant position in the futures market, they can short the token aggressively. Profits from these short positions (paid out in USDT) can be reinvested into buying spot liquidity later.

• The futures activity provides capital to support or manipulate the spot market afterward.

• No Project Funding Involved: If the project doesn’t provide direct capital for liquidity, the CEX may rely on internal trading desks or external MMs.

• Market Manipulation Risks: To ensure profitability, the CEX might coordinate with MMs to influence prices. Examples include:

• Pumping Futures Prices: Creating artificial demand to trigger short squeezes and liquidate over-leveraged traders.

• Spot Dumping: After the futures market establishes a profitable range, tokens can be dumped in the spot market to capitalize on price discrepancies.

This approach allows a CEX to profit from trading activity without directly holding the token, while potentially influencing market dynamics to maintain liquidity and drive fees. However, such practices may raise ethical concerns and could risk regulatory scrutiny if manipulation is evident.