VMP-003 - Create market - BTC/USDT Future - 2023/12/31

🗳️ Governance Proposals Market Proposals
1

VMP-003 - Create market - BTC/USDT Future - 2023/12/31

This is a quarterly BTC/USDT futures contract expiring on 2023/12/31 08:00:00 UTC time on Vega network.

Market Summary:

Name:
BTC/USDT expiry 2023 Dec 31th

Settlement asset:
USDT

Rationale:
BTC is the largest Crypto asset with the highest volume and Marketcap.

Market Details:

Instrument:
BTC/USDT-231231

Settlement data source:
CoinbaseOracle

Risk model:
Lognormal Risk Model

Liquidity monitoring parameters:

{
    "targetStakeParameters": {
        "timeWindow": "3600",
        "scalingFactor": 1
    },
    "triggeringRatio": "0.7",
    "auctionExtension": "1"
}

Price monitoring parameters:

{
  "triggers": [
    {
      "horizon": "60",
      "probability": "0.9999",
      "auctionExtension": "5"
    },
    {
      "horizon": "600",
      "probability": "0.9999",
      "auctionExtension": "30"
    },
    {
      "horizon": "3600",
      "probability": "0.9999",
      "auctionExtension": "120"
    },
    {
      "horizon": "14400",
      "probability": "0.9999",
      "auctionExtension": "180"
    },
    {
      "horizon": "43200",
      "probability": "0.9999",
      "auctionExtension": "300"
    }
  ]
}

Proposal JSON:

{
    "proposalSubmission": {
        "reference": "BTC/USDT-231231",
        "terms": {
            "closingTimestamp": "1693465200",
            "enactmentTimestamp": "1693468800",
            "newMarket": {
                "changes": {
                    "instrument": {
                        "name": "BTC/USDT expiry 2023 Dec 31st",
                        "code": "BTC/USDT-231231",
                        "future": {
                            "settlementAsset": "bf1e88d19db4b3ca0d1d5bdb73718a01686b18cf731ca26adedf3c8b83802bba",
                            "quoteName": "USDT",
                            "dataSourceSpecForSettlementData": {
                                "external": {
                                    "oracle": {
                                        "signers": [
                                            {
                                                "ethAddress": {
                                                    "address": "0xfCEAdAFab14d46e20144F48824d0C09B1a03F2BC"
                                                }
                                            }
                                        ],
                                        "filters": [
                                            {
                                                "key": {
                                                    "name": "prices.BTC.value",
                                                    "type": "TYPE_INTEGER",
                                                    "numberDecimalPlaces": "6"
                                                },
                                                "conditions": [
                                                    {
                                                        "operator": "OPERATOR_GREATER_THAN",
                                                        "value": "0"
                                                    }
                                                ]
                                            },
                                            {
                                                "key": {
                                                    "name": "prices.BTC.timestamp",
                                                    "type": "TYPE_TIMESTAMP"
                                                },
                                                "conditions": [
                                                    {
                                                        "operator": "OPERATOR_GREATER_THAN_OR_EQUAL",
                                                        "value": "1704009600"
                                                    }
                                                ]
                                            }
                                        ]
                                    }
                                }
                            },
                            "dataSourceSpecForTradingTermination": {
                                "internal": {
                                    "time": {
                                        "conditions": [
                                            {
                                                "operator": "OPERATOR_GREATER_THAN_OR_EQUAL",
                                                "value": "1704009600"
                                            }
                                        ]
                                    }
                                }
                            },
                            "dataSourceSpecBinding": {
                                "settlementDataProperty": "prices.BTC.value",
                                "tradingTerminationProperty": "vegaprotocol.builtin.timestamp"
                            }
                        }
                    },
                    "decimalPlaces": "1",
                    "metadata": [
                        "base:BTC",
                        "quote:USDT",
                        "class:fx/crypto",
                        "quarterly",
                        "sector:defi",
                        "enactment:2023-08-31T08:00:00Z",
                        "settlement:2023-12-31T08:00:00Z"
                    ],
                    "priceMonitoringParameters": {
                        "triggers": [
                            {
                                "horizon": "60",
                                "probability": "0.9999",
                                "auctionExtension": "5"
                            },
                            {
                                "horizon": "600",
                                "probability": "0.9999",
                                "auctionExtension": "30"
                            },
                            {
                                "horizon": "3600",
                                "probability": "0.9999",
                                "auctionExtension": "120"
                            },
                            {
                                "horizon": "14400",
                                "probability": "0.9999",
                                "auctionExtension": "180"
                            },
                            {
                                "horizon": "43200",
                                "probability": "0.9999",
                                "auctionExtension": "300"
                            }
                        ]
                    },
                    "liquidityMonitoringParameters": {
                        "targetStakeParameters": {
                            "timeWindow": "3600",
                            "scalingFactor": 1
                        },
                        "triggeringRatio": "0.7",
                        "auctionExtension": "1"
                    },
                    "logNormal": {
                        "riskAversionParameter": 0.000001,
                        "tau": 0.0001140771161,
                        "params": {
                            "sigma": 1.5
                        }
                    },
                    "positionDecimalPlaces": "4",
                    "lpPriceRange": "0.8",
                    "linearSlippageFactor": "0.001",
                    "quadraticSlippageFactor": "0.0"
                }
            }
        },
        "rationale": {
            "description": "## Summary\n\nThis proposal requests to list BTC/USDT-231231 as a market with USDT as a settlement asset on the Vega Network as discussed in: https://community.vega.xyz/.\n\n## Rationale\n\n- BTC is the largest Crypto asset with the highest volume and Marketcap.\n- Given the price, 1 decimal places will be used for price due to the number of valid digits in asset price. \n- Position decimal places will be set to 4 considering the value per contract\n- USDT is chosen as settlement asset due to its stability.",
            "title": "BTC/USDT-231231"
        }
    }
}
2

The team will be focusing on providing feedback and support around VMP-001, VMP-004, and VMP-007 this week since these June ME expiry markets are the most time sensitive.

They will come back to this proposal once those are submitted for voting.

3

Hi @Yy-Shadow, I have two suggestions:

  1. we should tighten lpPriceRange to maybe 0.1 or even 0.05 to make it harder for any LP to “freeride” on others’ liquidity.

  2. maybe we can consider moving tau from 0.0001140771161 (which is currently the year fraction corresponding to 1h) to 0.000009506426342 (which would correspond to 5 min). This will push out the maximum leverage to 43x for short positions, 44x for long positions.

4

I should add that if the network updates as anticipated next week then we’d need to update the proposal to include the “parent” market, so LPs can carry over their equity-like-share. We’ll provide the JSON in due course (no point posting it till the new version is in mainnet I suppose).

5

To update on this, the deployment went in as planned, so we should assume you can add details of parent markets to all proposals ahead of submission if desired.

Details of this can be found here.

Effectively though it simply requires that you add the below section to the proposal.

 "terms": {
    "newMarket": {
      "changes": {
        "successor": {
          "parentMarketId": "nnnnnnnn",
          "insurancePoolFraction": "1"
        },
6

I would recommend insurancePoolFraction of about 0.1 to 0.3.

What happens is that at the end of opening auction of the successor market a fraction (e.g. 0.1) of the insurance pool balance of the parent is transferred to the successor.

It is good if the insurance pool of the successor isn’t empty on launch. On the other hand there are still credit risks in the parent market - especially around settlement so it would not be great to move the entire insurance pool to the successor market.

7

Could you help remind me what those changes imply please

8

@Yy-Shadow apart from the parent market (which I leave up to you) and apart from trading terminated timestamp (which clearly has to change) the only changes I’m suggesting are:

  1. we should tighten lpPriceRange to maybe 0.1 or even 0.05 to make it harder for any LP to “freeride” on others’ liquidity.
  2. maybe we can consider moving tau from 0.0001140771161 (which is currently the year fraction corresponding to 1h) to 0.000009506426342 (which would correspond to 5 min). This will push out the maximum leverage to 43x for short positions, 44x for long positions.
9

One thing to be aware of @Yy-Shadow , after the governance proposals yesterday were enacted all market proposals will take 7 days to be processed. Therefore if you want these markets up and running with some overlap with the previous markets you should aim to make the proposals soon.

2 Likes