ViperQ: Order Flow Pattern Recognition via Auction Market Theory for Reinforcement Learning Trading

Market making under realistic order-flow dynamics is challenging due to the clustered, self-exciting nature of order arrivals, which are naturally modeled by non-Markovian Hawkes processes. We propose a model-free reinforcement learning (RL) framework for market making with general Hawkes order-flow dynamics. We first establish non-asymptotic performance bounds that quantify the loss incurred by approximating the infinite-dimensional Hawkes state using a finite collection of exponentially weighted features. Guided by this analysis, we introduce the Hawkes-Structured Network (HSN), a novel neural architecture that encodes historical order flow through a learnable mixture-of-exponentials filter. HSN is trained end-to-end using model-free RL, jointly optimizing the feature representation and quoting policy directly from reward feedback. Experiments on single- and multi-asset market-making problems with mixture-of-exponentials, power-law, and regime-switching kernels demonstrate that HSN outperforms general-purpose neural architectures, achieving higher trading rewards while implicitly recovering the underlying order-flow intensities.

This paper studies reinforcement learning for high-frequency trading on limit order books by pairing an Order-Flow-based state model with policy-gradient methods. Instead of value-based RL techniques like tabular Q-learning, our approach deploys policy-based methods like vanilla PPO and DeepSeekMath-inspired variants like GRPO and GSPO, that use group-normalized updates and downside-aware shaping. On backtests with financial assets AMZN, AAPL, and GOOG under a simplified backtesting setup based on spread-scaled rewards, these new policies improve net average PnL, profitability, and drawdown over the Q-Learning baseline. Our results show that (1) Order-Flow signals are an adequate state for policy RL and (2) group-aware PPO surrogates are preferable over value-based baselines.

Market-making strategies in real limit order book markets face substantial model uncertainty and regime-shift risk. Existing adversarial reinforcement learning approaches improve robustness by formulating the Avellaneda--Stoikov market-making problem as a zero-sum game between a market maker and an environmental adversary. However, these approaches typically rely on Poisson order arrivals and neglect trade-induced price impact, limiting their ability to capture important high-frequency market microstructure effects such as clustered order flow, self-excitation, and post-trade price feedback. We extend adversarial reinforcement learning for market making to a more complex environment with Hawkes self-exciting order arrivals and trade-induced price impact. To mitigate the increased non-stationarity introduced by the expanded regime space, we incorporate an LSTM module that explicitly models the temporal structure of recent observations. We further characterize the equilibrium properties of the proposed framework through both game-theoretic analysis and numerical experiments, and introduce a robustness evaluation protocol focused on improvements in the left tail of the return distribution. Experimental results across a range of market regimes show that the proposed method achieves improved left-tail performance in most complex microstructure environments. In particular, the gains are pronounced in regimes with strong Hawkes excitation and low-to-moderate price impact. Bootstrap tests provide no evidence that these improvements are obtained through a stronger terminal directional inventory bias. These results suggest that combining adversarial training with temporal state representation can improve the robustness of reinforcement-learning-based market-making strategies under order-flow self-excitation, price impact, and regime uncertainty.