[Withdrawn] 0.6% Maximum Spread for ALP/MLP, 1.2% for Nu Funded Liquidity Operations

NuShares Motions
#1

Given the discussion here and a counter proposal here I believe there is place for another view.

Key differences are:

  • Lower spread (0.6%) for ALPs/MLPs to improve liquidity quality (with exemption when high fees are incurred) and with that likely the volumes
  • Medium spreads (0.7%-1.4%) for Nu-funded liquidity but limited to maximum of 30% of total liquidity when ALP and MLP fails e.g. in high periods of volatility as a first line of defence.
  • High spread (1.4%-2.5%) for Nu funded liquidity but limited to a maximum of 10% of total liquidity as a last line of defence
  • Adding a role for FLOT to respond when High Spread funds are being touched.

Here is the link to my motion:
https://daology.org/proposals/5f9ce9e6fabd149ce8c321cfd28491827602a955

For your convenience below the full proposal listed:

All shareholder sponsored liquidity must be provided at a 0.6% spread or less. When determining the spread, exchange transaction fees will not be taken into account. The 0.6% maximum spread applies to the prices as they appear on the order book. It applies to all liquidity provider models, including, but not limited to, ALP pools, MLP pools and individuals on contract to provide liquidity.

Nu funded operations like gateways are explicitly excluded from this regulation, because they play a crucial role a second and last line of defence if all other means of providing liquidity fail and might need to be operated at a higher spread, up to 1.4% to continue the notion of pegged products. However they should never provide more than 30% of the total liquidity.

A small percentage, about 10% of total liquidity provided by Nu should be provided at even higher spreads (1.4%-2.5%) to function as a canary in the coalmine and last line of defence. When these funds are touched urgent (< 8 hours) measures will need to be taken by FLOT to restore the normal spread by providing balanced liquidity at nominal prices.When this happens often or continuously during 3 days or more the current ALP rewards will need to be reviewed by the Shareholders and may need to be increased.

On the contrary when the liquidity at higher spreads haven’t been touched for >3 months the ALP rewards may need to be lowered.

This new regulation cannot be interpreted as modifying any existing contract for liquidity provision. It merely mandates that all new proposals comply within a 0.6% maximum spread. This means existing liquidity pools will become compliant when their next contract passes. Exceptions can be provided when the regular fees on an exchange exceed 0.25%. The spread can then be increased with the difference.

There is another exemption for trading pairs with illiquid assets. Liquid assets shall be defined as Bitcoin, Ether, Litecoin and government currencies such as USD, EUR and CNY. All other assets are considered illiquid and parametric order books with an increased spread are permitted.

1 Like
[Passed] Motion to join FLOT - masterOfDisaster
[Passed] Motion to join FLOT - masterOfDisaster
Current Liquidity
[Passed] 1% Maximum Spread in Shareholder Funded Liquidity Operations
[Passed] 1% Maximum Spread in Shareholder Funded Liquidity Operations
Nu Voting Hot List – Mar, 09 2018
#2

30%, 10% parameters are nice in theory…in practice the proportion varies instantly…so I do not see how this motion would be executed if passed.

#3

They are Nu-funded bots and the contract needs to be adjusted accordingly, I agree. The average total liquidity in the network doesn’t vary that much. The percentage of Nu-funded liquidity can be adjusted say each week or each fortnight and with some accepted deviation or minimum amount to prevent unnecessary transactions.
The funds the Nu-funded bots are holding can be increased by FLOT by adding funds and decreased by the custodian transferring funds back to FLOT.

#4

I don’t think this is possible.

#5

And why do you think that? End 2014 and early 2015 we had 0.4% spreads.

#6

At first, i was against at any motion of this kind (as i have written in JL’s thread)
but then i was convinced that a motion like this, is a good publicity for NU customers (a.k.a. traders)
in order to convince them to turn their bots at NU.
Thus we have to keep a clear and simple (as possible) motion. If we start the “if then” we will loose them again!
I like the title as it is, i cannot follow the rest of “ifs” :slight_smile:

#7

Single LPs make the math much simpler. If you’re talking a collective like ALPs you have to talk in min and max. If the price moves around, what is the minimum spread and maximum spread of the collective given a set of deviation and offset parameters?

Ex: Ignore Exchange Fees, deviation=0.25%
So if the offset = 0.25%/2 = 0.125% then there will be collisions between orders (minimum spread = 0%). The thing is, if we consider the maximum spread = 2*offset + deviation = 0.5%, we see that at 0.5% ‘maximum spread’ or lower the network is literally burning money by accident.

0.6% is cutting it real close.

#8

After ample considerations this motion is up for voting now (and the daology link published). I believe the combination of low spreads for the lower 60% amount of the liquidity provisioning tot attract trading and the higher spreads for the 40% to protect the peg is a good balance to start with. When the overall liquidity amounts go up significantly (>100%) the percentages may meed to be reviewed.

When you are supportive of this please add the following motion has to your wallet:

6d76ce3ff163a3bd8cd8f43b7126a7670ec9d28a

I will also add it to my datafeed.

Thanks for your consideration.

[Discontinued] Cybnate's Nu datafeed - BETA
#9

Bump, here is a personal plead to consider this motion over JordanLee’s motion.

A lower quality peg for non ALP/MLP operations where Nu takes risk should be possible as it is now. Even yesterday and today that saved the peg for those who paid attention to ALP/MLP unable to provide buy side funds. It all came from Zoro’s NuBot with high spread after my medium spread (1.4%) Pybot was also depleted. Loosing those lines of defence in order to always provide a high quality peg is suicide in my opinion. A best places are sold out option must always be there imo, hence a lower quality peg for Nu funds as I propose.

Only option Jordan’s motion could work is having almost immediate access to T5 and T6 funds. I haven’t seen solutions to withdraw from T5 and T6 quickly or anyone working on this in the near future. Without being able to top-up within hours I believe Jordan’s motion will lead eventually to peg suicide indeed.

Please consider the consequences unless you want to buy NSR really, really cheaply in the near future.
Not making a plea lightly :sunglasses:

2 Likes
#10

Utterly shameless plug. I beg your forgiveness.

Your motion goes in the right direction, but not far enough.
Your PyBot at 1.4% spread is no sufficient line of defence. How long did the BTC you received yesterday last?
Deposit/trade logs help you answer that.

@zoro’s at an even bigger spread is that line of defence.
This operation traded $3,000 of $9,000 BTC since yesterday, while your funds got drained quite soon.

This is why shareholders should vote for this motion:

This is a very sophisticated and much more detailed version than what I have put up for voting:

My motion to regulate the spread is the only one compliant with what I call superior motion to regulate spread.

#11

Just this time :wink:

It is first line of defence after the high quality peg sells out. 30% of liquidity should be in it according to my motion.
In other words no more seats at the sunny terrace but still inside at the window. [quote=“masterOfDisaster, post:10, topic:3931”]
@zoro’s at an even bigger spread is that line of defence.
[/quote]
That is the seat with no windows in de back next to the toilet :wink:
Just following the analogy of a restaurant offering seats for people to dine.
My proposal still offers 10% of liquidity at that level. It is also the canary in the coalmine when order are sold at this peg. Urgent action and top up of the higher quality peg levels is required.

Second best I would say :slight_smile: Better than Jordan’s for sure.

#12

This is indeed the main challenge.
Jordan Lee s motion assumes this is the case or assumes that we have enough time to unlock funds from T5 and T6, which assumes that we have enough reserves to replenish the buy side while the unlocking is being processed.
This is what he is advocating by proposing a nsr sales, which i agree on in principle.

The problem with low quality peg is that there does not seem to be any limit in the spread degradation.
What about providing liquidity at 30% spread? This does seem to protect the peg you would argue, but in fact it does the opposite, because either traders buy at 30% spread which destroys the peg, or they do not buy, which is better but does not help nubits usage…

#13

Look how @zoro’s BTC got eaten at 2.8% spread. Only 6 BTC left.
2.8% is nit enough at the moment.

If that’s the seats next to the toilets, traders at Poloniex will soon have to take a seat ON the toilets…

#14

Hum.
It seems that for the time being we need to increase the spread even further.

1 Like
#15

LOL, but you are right. Without short term access to T5 and T6 we are in a dire state.
I thought FLOT had a transaction underway to top up both Pybot and Zoro.

#16

I’ve spent some time trying to wrap my head around the percentage values you have in your proposal.
I share @Nagalim’s assessment that it doesn’t work this way
And that’s not because we have no clue about a wise choice of numbers.
It’s because the percentage values are related to the total liquidity.
If ALP drops off, you have to reduce the gateway funds, because total liquidity gets reduced.
That’s the opposite of what’s necessary.

It might work, if you relate it to NBT in circulation.
Like

  • x% of NBT in circulation on ALPs/MLPs
  • y% of NBT in circulation for NuOwned operations at a medium spread
  • z% of NBT in circulation for NuOwned operations at a high spread

My numbers for x, y, z would differ from yours :wink:

#17

Thanks for trying to improve my proposal :wink:
but I believe my proposal achieves what you are describing…

The contracts we would have with the gateway providers would still relate to the average liquidity percentages. Therefore during a crises the absolute amount would be stable and the percentage would likely increase sharply. Exactly what is needed imo. It only changes after weeks or months depending on the contracts when new gateway contracts needs to be negotiated.

So there is no reason to relate it to NBT in circulation, but it is certainly an option to explore.
The advantage of total liquidity instead of NBT in circulation is that it actually reflects usage of NBT better.

[Passed] 1% Maximum Spread for ALP/MLP, Above 1% Allowed for Nu Funded Liquidity Operations (e.g. Gateways)
#18

That’s not what your motion states.
But with the average liquidy itvs effectively close to what I proposed :wink:

#19

That is correct, but effectively it will work like that given the 1-3 months term contracts with the gateway operators.[quote=“masterOfDisaster, post:18, topic:3931”]
But with the average liquidy itvs effectively close to what I proposed
[/quote]
I’m sure we can work on an improved proposal, there was not much time for discussion and improvements when the originals came up. Not sure if that is useful.

#20

Those contracts will be bound to the limits of your very motion:

2.5% spread is not enough. We are at 5% offset (!) and still get dents in our buy walls!

If you motion were already in place, the peg wouldn’t have been kept above $0.95, except for sheer luck.
I fear, there’s not much room for arguing here.

But we can make a test and lower the spread of the NuBot gateways to 2.5% (offset 1.25%), if you want to see it, before you believe it.

1 Like
Current Liquidity