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Offline bytemaster

Changes to Cover Rules - Eliminate 5% fee
« on: January 27, 2015, 09:12:23 PM »

We are adding an operation that will allow you to cover a short position using the collateral at any time.  We are doing this by giving the user the ability to set the "call price" to anything higher than the "minimum call price".   This feature makes it trivial to bypass the 5% fee by slightly increasing your call price, so this makes the 5% fee impossible to enforce.

In reality the 5% fee merely served to create a variable amount of additional collateral depending upon the risk tolerance of each individual shorter.  Considering we are raising the min collateral requirement from 1.5 to 2x the added benefit of the 5% fee is insignificant.  The fear of a short squeeze and being forced to buy at up to 10% above the feed if there are not enough orders at the feed means there is still plenty of incentive to avoid forced buying.

If you set your call price at or above the price feed then your order will be matched against any and all bids up to 10% above the feed.   So be careful or you might just walk the book. 

Overall this will simplify the explanation of BitShares and shorts and remove uncertainty over how shorts and fees will be calculated.   

For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline Bitcoinfan

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Re: Changes to Cover Rules - Eliminate 5% fee
« Reply #1 on: January 27, 2015, 10:12:06 PM »


I presume this also removes the +5% given to Bitasset holders?

Offline bytemaster

Re: Changes to Cover Rules - Eliminate 5% fee
« Reply #2 on: January 27, 2015, 10:14:38 PM »


I presume this also removes the +5% given to Bitasset holders?

No, BitAsset holders still get interest from shorts.   Just no penalty for having the blockchain cover for you.
For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline Bitcoinfan

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Re: Changes to Cover Rules - Eliminate 5% fee
« Reply #3 on: January 27, 2015, 10:29:24 PM »
I'm trying to keep up  with the bid ask rules,  We're getting an average of 1% yield right now.  There were expectations that this would be 5% floor that was the minimum.  Is this still the plan?  Or will this be implemented in a bitusd5percent, bitusd10percent asset name?


Asking this as I'm curious as to how bitshares will use these yield rates to attract banks to hold bitusd as you had mentioned before.  you don't have to explain your strategy right now ...

Offline bytemaster

Re: Changes to Cover Rules - Eliminate 5% fee
« Reply #4 on: January 27, 2015, 10:31:49 PM »
I'm trying to keep up  with the bid ask rules,  We're getting an average of 1% yield right now.  There were expectations that this would be 5% floor that was the minimum.  Is this still the plan?  Or will this be implemented in a bitusd5percent, bitusd10percent asset name?


Asking this as I'm curious as to how bitshares will use these yield rates to attract banks to hold bitusd as you had mentioned before.  you don't have to explain your strategy right now ...

We have no guaranteed yield rate.  Yield rate will be based upon market demand for shorts which will be based upon how bullish people are on BTS. 
For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline arhag

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Re: Changes to Cover Rules - Eliminate 5% fee
« Reply #5 on: January 27, 2015, 11:46:05 PM »
We are adding an operation that will allow you to cover a short position using the collateral at any time.  We are doing this by giving the user the ability to set the "call price" to anything higher than the "minimum call price".

Not exactly how I wish it was done (since you cannot cancel a margin call done at a higher call price than the minimum call price), but it is definitely an improvement. By the way, can you change the call price back to whatever you want (> minimum call price, of course) at any time as long as the short hasn't been margin called yet?

Considering we are raising the min collateral requirement from 1.5 to 2x the added benefit of the 5% fee is insignificant.

Yay! +5% Finally we will have consistency between what you have been claiming in blog posts and the actual code. Next can we just get rid of any enforced initial collateral limits (besides > minimum call price, of course)?

The fear of a short squeeze and being forced to buy at up to 10% above the feed if there are not enough orders at the feed means there is still plenty of incentive to avoid forced buying.

Wait, is that a new change as well, or has it always been like that? Agent86 will be happy.

If you set your call price at or above the price feed then your order will be matched against any and all bids up to 10% above the feed.   So be careful or you might just walk the book. 

So we finally have a limited form of a limit order that users can place at any time. The restriction are that it can only be a BitAsset buy order using BTS, the price limit has to be 10% above the price feed, you need 3x more BTS available than what you really need, and you need to do a shorting step and get it matched before you can place the price limit order.  ;) That is my tongue-in-cheek way of asking whether or not you're worried about people observing a call price change transaction and front-running the order with their own call price change transaction that was previously set up.


P.S. I just noticed you are using the phrase "above the feed" when it really means above the feed (in BTS/BitAsset)! Haha. Thanks for the effort. I appreciate it.
« Last Edit: January 27, 2015, 11:51:40 PM by arhag »

Offline liondani

Re: Changes to Cover Rules - Eliminate 5% fee
« Reply #6 on: January 27, 2015, 11:58:46 PM »
 +5%
certainly to the right direction!
  https://bitshares.OPENLEDGER.info/?r=GREECE  | You are in Control | BUY | SELL | SHORT | SWAP | LOAN | TRADE |  

zerosum

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Re: Changes to Cover Rules - Eliminate 5% fee
« Reply #7 on: January 28, 2015, 12:04:55 AM »

Agent86 will be happy.


That is about the only positive thing in today's changes/announcements.

Let's trigger Black Swan event with 125% average collateralization (or more... choose your number) + screw the shorts even more + let's add another not so useful order type to our buggy as hell product.

Awesome!

Offline merlin0113

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Re: Changes to Cover Rules - Eliminate 5% fee
« Reply #8 on: January 28, 2015, 12:05:13 AM »
+5%
certainly to the right direction!

+1

Again we see another case of BM's openness to community voice. Good!

Offline merlin0113

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Re: Changes to Cover Rules - Eliminate 5% fee
« Reply #9 on: January 28, 2015, 12:07:01 AM »

Agent86 will be happy.


That is about the only positive thing in today's changes/announcements.

Let's trigger Black Swan event with 125% average collateralization (or more... choose your number) + screw the shorts even more + let's add another not so useful order type to our buggy as hell product.

Awesome!

Is this the case? I'm really confused.

Offline bytemaster

Re: Changes to Cover Rules - Eliminate 5% fee
« Reply #10 on: January 28, 2015, 02:44:37 PM »

Agent86 will be happy.


That is about the only positive thing in today's changes/announcements.

Let's trigger Black Swan event with 125% average collateralization (or more... choose your number) + screw the shorts even more + let's add another not so useful order type to our buggy as hell product.

Awesome!

How does this screw the shorts even more?  Removed 5% fee and allowing them to cover without maintaining an extra 100% BTS outside their collateral position.  This move is very PRO-SHORT because it actually reduces the amount they must keep on hand.

Lets assume a "WORST CASE" pre-mature calling of a Black Swan.   Prior to the swan there was 1 short with 201% collateralization and all other shorts were just created with 300% collateralization.   The price falls by 51% while no orders are on the book.   The 1 short hits 100% collateralization, all of the other shorts are at 150% collateralization (below the maintenance position).   So we could say that "worst case" a black swan is called with 150% *average* collateralization, but that would be a black swan among black swans.    The far more likely case is that short positions are evenly spread prior to the swan.  The swan hits and the least collateralized are covered in the market by consuming the order book.  As the price continues to fall eventually the order book runs out.  Lets assume that 10% of all open shorts cover into the open order book, this makes the new "least collateralized" position 210% which falls to 100% to trigger liquidation.   In this case the average collateralization at time of liquidation would be just 121%

So I would wager that the probability of having exactly a 53% fall to trigger the minimal possible black swan is very low, it could easily fall 60% if it just fell 53%.  This means that while the swan may have been called "early" these rules once again FAVOR the pre-swan shorts by minimizing their losses.

I didn't add a new order type for this, I merely removed a fee and allowed the user to increase the call price.   
For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

zerosum

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Re: Changes to Cover Rules - Eliminate 5% fee
« Reply #11 on: January 28, 2015, 03:39:24 PM »

Agent86 will be happy.


That is about the only positive thing in today's changes/announcements.

Let's trigger Black Swan event with 125% average collateralization (or more... choose your number) + screw the shorts even more + let's add another not so useful order type to our buggy as hell product.

Awesome!

How does this screw the shorts even more?  Removed 5% fee and allowing them to cover without maintaining an extra 100% BTS outside their collateral position.  This move is very PRO-SHORT because it actually reduces the amount they must keep on hand.

Lets assume a "WORST CASE" pre-mature calling of a Black Swan.   Prior to the swan there was 1 short with 201% collateralization and all other shorts were just created with 300% collateralization.   The price falls by 51% while no orders are on the book.   The 1 short hits 100% collateralization, all of the other shorts are at 150% collateralization (below the maintenance position).   So we could say that "worst case" a black swan is called with 150% *average* collateralization, but that would be a black swan among black swans.    The far more likely case is that short positions are evenly spread prior to the swan.  The swan hits and the least collateralized are covered in the market by consuming the order book.  As the price continues to fall eventually the order book runs out.  Lets assume that 10% of all open shorts cover into the open order book, this makes the new "least collateralized" position 210% which falls to 100% to trigger liquidation.   In this case the average collateralization at time of liquidation would be just 121%

So I would wager that the probability of having exactly a 53% fall to trigger the minimal possible black swan is very low, it could easily fall 60% if it just fell 53%.  This means that while the swan may have been called "early" these rules once again FAVOR the pre-swan shorts by minimizing their losses.

I didn't add a new order type for this, I merely removed a fee and allowed the user to increase the call price.

1.So you made my point on the black bird event -not 125%, 121% in your average scenario and you agree it could be much more - 150% in your example. And while 120% might not seem enough, but that is because of your arbitrary 200% margin call level. In my view 133% collateral is about the right margin call level and because of that I consider 125% average collateral way too fast triggered….

2. On the shorts being screwed issues:
a. I continue to insist that shorts are paying interest to lend money.Due to the simple fact that they provide 2x collateral!  Discussed in detail elsewhere.
b. Going from 150% collateral to 200%  to trigger a margin call is not screwing them up more? I get the consistency needed to match your writings and the actual code but I suggest changing your blog not the code.


3. No new order type? That’s nothing short of strange...

What is the current order type that does NOT follow the 'Get what you asked for' market mechanics?

Assuming margin order for 100bitUSD (call price of 100 BTS/bitUSD). Feed price of 100 BTS/bitUSD
And sell bitUSD order book:
20 bitUSD @ 100 BTS/bitUSD
40 bitUSD @ 105 BTS/bitUSD
40 bitUSD @ 110 BTS/bitUSD

How you gonna match those with our margin order?
-First scenario (aka screw the short even more), no new orders required probably, pay for 100 bitUSD @ 110 BTS/bitUSD
-Make a new order type that matches to the price of each ask order, do not screw the shorts, but allow for potential front running?



Offline Rune

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Re: Changes to Cover Rules - Eliminate 5% fee
« Reply #12 on: January 28, 2015, 04:00:09 PM »
We don't need these changes anytime soon. We need to focus on stability, shareholders have already been promised that there would be no more new blockchain features for another 6 months after 1.0.

This is useful in the long term but absolutely should not be considered any sort of priority when the full node barely works and there's no light wallet.

New UIA system and relative orders are needed. Any other new blockchain features in the medium term are going to damage our market cap.

Online lil_jay890

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Re: Changes to Cover Rules - Eliminate 5% fee
« Reply #13 on: January 28, 2015, 04:04:50 PM »
We don't need these changes anytime soon. We need to focus on stability, shareholders have already been promised that there would be no more new blockchain features for another 6 months after 1.0.

This is useful in the long term but absolutely should not be considered any sort of priority when the full node barely works and there's no light wallet.

New UIA system and relative orders are needed. Any other new blockchain features in the medium term are going to damage our market cap.

Disagree.  We need the ability to cover short positions with the already locked up collateral before a 1.0 release.  The current method of covering a short is not functional for the investors and traders we are trying to target and will most likely be our initial adopters.

Offline Rune

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Re: Changes to Cover Rules - Eliminate 5% fee
« Reply #14 on: January 28, 2015, 04:10:12 PM »
We don't need these changes anytime soon. We need to focus on stability, shareholders have already been promised that there would be no more new blockchain features for another 6 months after 1.0.

This is useful in the long term but absolutely should not be considered any sort of priority when the full node barely works and there's no light wallet.

New UIA system and relative orders are needed. Any other new blockchain features in the medium term are going to damage our market cap.

Disagree.  We need the ability to cover short positions with the already locked up collateral before a 1.0 release.  The current method of covering a short is not functional for the investors and traders we are trying to target and will most likely be our initial adopters.

Hmm, this makes sense. Then this has to come as fast as possible, before 1.0. But 1.0 can't wait too long, we need to have it out before ethereum launches. Investors/traders are above all else attracted to liquidity, and that's what the delays hurt the most.

edit: read it again and all this really does is implement a limit order for 10% above the price feed. It's not necessary and will cause far more problems than it will solve in the short term.

I also disagree with the collateral requirement increase. The current system works and it withstood the crash. It's too late to change these things now, the net effect is guaranteed to be negative. This will hurt our market cap.
« Last Edit: January 28, 2015, 04:15:49 PM by Rune »

 

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