Just-in-Time Resale in an Ahead-of-Time Auction: An Event Study

Abstract

We study Arbitrum's Timeboost mechanism following the adoption of Kairos by its main users -- Wintermute and Selini Capital -- to understand how the emergence of a just-in-time secondary market affects the dynamics of an ahead-of-time primary auction. We find that competition in the primary auction significantly declines and surplus shifts away from Arbitrum. After the transition, bids paid in the primary auction correspond to only 14.8\% of the highest bid (compared to nearly 62.7\% in the \textit{Pre-Kairos} era), and a lower share of searcher profit-and-loss (PnL), despite total PnL (gross of auction payments) remains of similar magnitude across regimes. This indicates that the primary auction effectively ceases to function as a meaningful surplus extraction mechanism. Although demand for time-boosting valuable CEX--DEX arbitrage transactions continues to increase with external price volatility, observed bids in the Timeboost auction no longer reflect this demand. While the exact distribution of the additional value between searchers and Kairos remains unclear, the evidence suggests that the secondary market captures a substantial share at the expense of the primary auctioneer. We conclude by outlining possible ways for Arbitrum to recapture this value, including modifying the auction design to reduce the gap between value and payments and adopting a dynamic reserve price.

Figures (9)

• Figure 1: Daily auction round win shares on Timeboost. Top: percentage share of the daily rounds won by each participant. Bottom: absolute round counts since February 2026. Hatched regions indicate auction rounds with no bidders.
• Figure 2: Number of bidders participating in each Timeboost auction round over time. Vertical dashed lines mark the regime boundaries defined in \ref{['sec:timeline']}.
• Figure 3: Timeboost auction bidding dynamics over time. Top: top bid (first price) and paid bid (second price) per auction round in ETH. The dotted line shows daily ETH volatility (right axis). Bottom: relative bid gap between the top bid and the paid bid for each auction round (points) and the daily median (line).
• Figure 4: Bid distributions for Wintermute, Selini, and Kairos. The left half of each violin corresponds to the Pre-Kairos era, while the right half corresponds to the Steady State. The dashed horizontal line indicates the reserve price (0.001 ETH).
• Figure 5: Kairos loss rate and median bids by hour of day in the Steady State period. The shaded region indicates UTC hour bins overlapping the regular NYSE session (14:30--21:00 UTC during EST).