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Offline santaclause102

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Different fees for different short holding periods
« on: September 26, 2014, 10:28:36 PM »

I relistened to todays mumble session. BM said that all shorts will have to redeem their collateral at least once a month which will help make the market more liquid.

So I though: Why not make it more costly (how?) to keep your short position for long. The longer you want to keep it the more costly it is.

Questions: What types of costs could apply ? And would the period be determined at the beginning of going short or when redeeming the collateral?

Offline bytemaster

Re: Different fees for different short holding periods
« Reply #1 on: September 26, 2014, 10:43:05 PM »
Don't want to add costs to market makers. 
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Offline santaclause102

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Re: Different fees for different short holding periods
« Reply #2 on: September 26, 2014, 10:59:19 PM »
Doesn't necessarily have to be paid by market makers.

Couldn't we say the longer you want to reserve the right to not redeem your collateral the more collateral you have to put up? And the short position would have to choose the length of the maximum holding period when going short.

Or the shorter the 'maximum short holding period' the more yield will the the long position get that takes the other side of your specific short position? That would make it more of a market and might regulate the liquidity better but I would imagine that it would get complicated since we then have different BitUSDs with different yields...

Overall the imbalance of short and long liquidity seems to be the biggest issue and would profit from more incentives and market mechanics to help balance the two sides.
« Last Edit: September 26, 2014, 11:01:13 PM by delulo »

Offline nomoreheroes7

Re: Different fees for different short holding periods
« Reply #3 on: September 26, 2014, 11:17:10 PM »
Really? Not sure I like the idea of having to cover once a month...I have a bunch of shorts open now, because I expected the price to rise sometime in probably the next few months, not necessarily real soon...

Offline santaclause102

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Re: Different fees for different short holding periods
« Reply #4 on: September 26, 2014, 11:27:39 PM »
Quote
I expected the price to rise sometime in probably the next few months, not necessarily real soon...
the goal of the proposal is to avoid such free lunch an incentive traders to make more short/medium term predictions.

Offline nomoreheroes7

Re: Different fees for different short holding periods
« Reply #5 on: September 26, 2014, 11:37:15 PM »
Quote
I expected the price to rise sometime in probably the next few months, not necessarily real soon...
the goal of the proposal is to avoid such free lunch an incentive traders to make more short/medium term predictions.

Almost feels like there should be a "grandfathering" clause or something then, I would've never opened the shorts if I would have known that. I've already lost some BTSX getting margin called in the BitCNY market (due to the low liquidity, not the actual price on the exchange) and I wouldn't have risked more of my balance if I didn't think I could hold it until BTSX really took off.

 :(

Offline starspirit

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Re: Different fees for different short holding periods
« Reply #6 on: September 27, 2014, 12:26:22 AM »
Quote
I expected the price to rise sometime in probably the next few months, not necessarily real soon...
the goal of the proposal is to avoid such free lunch an incentive traders to make more short/medium term predictions.

what is the "free lunch" here? long term risk for long term potential gain as well as potential loss.
an efficient market needs a cross-section of traders, from short to medium term, trend vs value etc. homogeneity means no need for the market, no trading.

Offline nomoreheroes7

Re: Different fees for different short holding periods
« Reply #7 on: September 27, 2014, 12:51:05 AM »
I would say I'm taking a fairly big risk right now as it is. I have no guarantee that BTSX will be as successful as I think it will, and also no guarantee the price won't dip below the margin call before it rises greatly. Also by keeping my BTSX tied as collateral for the shorts, I'm risking opportunity cost from being able to trade elsewhere and in other coins. Based on that, I definitely wouldn't call a long-term short a "free lunch".

Offline Markus

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Re: Different fees for different short holding periods
« Reply #8 on: September 27, 2014, 01:18:25 AM »
The risk with punishing shorts is that you break the peg the other way. If there were a lack of shorts what is going to keep the BitAsset prices from becoming overvalued?

Introducing a fee shorts have to pay for long-term holding is equivalent to the interest discussion (the +5% thing) we had half a year ago.

Offline Empirical1.1

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Re: Different fees for different short holding periods
« Reply #9 on: September 27, 2014, 01:48:44 AM »
I think I'm in favour of long term shorts, people who want to hold longer than a month competing via fees/interest rate they're willing to pay after a certain max collateral is reached.

Something like the bidding system here maybe, 

https://bitsharestalk.org/index.php?topic=9364.0

Quote
The interest rate acts as the price. The trades are conducted using the "price" and time as the two major factors.
Price at transaction: The offers provided by the borrowing party with a higher price take precedence over those with a lower price.
Time: When the two parties have the same offered price, the bids put in first take precedence over those offered later. The transactions will follow chronological order going from those submitted first to last. 

This lets people be long term shorts without punishing market makers and raises funds to add to BitYield.

(There should be lots of churn because people will offer high interest rates and max collateral to get the short and then just cover within a month to avoid the interest rate and if they don't BitYield wins and more BitAsset creation is incentivised.)



« Last Edit: September 27, 2014, 01:57:27 AM by Empirical1.1 »

Offline GaltReport

Re: Different fees for different short holding periods
« Reply #10 on: September 27, 2014, 02:02:52 AM »
Quote
I expected the price to rise sometime in probably the next few months, not necessarily real soon...
the goal of the proposal is to avoid such free lunch an incentive traders to make more short/medium term predictions.

Almost feels like there should be a "grandfathering" clause or something then, I would've never opened the shorts if I would have known that. I've already lost some BTSX getting margin called in the BitCNY market (due to the low liquidity, not the actual price on the exchange) and I wouldn't have risked more of my balance if I didn't think I could hold it until BTSX really took off.

 :(

I agree.  It doesn't seem fair to apply this to existing shorts.

Offline pendragon3

Re: Different fees for different short holding periods
« Reply #11 on: September 27, 2014, 06:05:13 AM »
Quote
I expected the price to rise sometime in probably the next few months, not necessarily real soon...
the goal of the proposal is to avoid such free lunch an incentive traders to make more short/medium term predictions.

Almost feels like there should be a "grandfathering" clause or something then, I would've never opened the shorts if I would have known that. I've already lost some BTSX getting margin called in the BitCNY market (due to the low liquidity, not the actual price on the exchange) and I wouldn't have risked more of my balance if I didn't think I could hold it until BTSX really took off.

 :(

I agree.  It doesn't seem fair to apply this to existing shorts.

Agree. Existing short positions should be grandfathered in. Otherwise, it wouldn't be fair for those who took a risk to invest in their long-term views under the publicized rules that were in force at the time. What happened to the dictum that "everyone should get what they ask for" and not be forced to do something against their will?

More generally, forcing shorts to cover periodically doesn't seem like a good idea. It's a heavy-handed measure that is unlikely to increase liquidity much if at all. The reason is that it disincentivizes would-be short sellers too much. A short-seller who is forced to cover won't be able to easily re-short, as they have to compete with numerous others on collateral amount to carry out another short sale. The uncertainty of whether rolling into another short is feasible is disruptive to medium-term or long-term trading strategies of the bulls. It's an attempt to create greater balance between bulls and bears, but at a high cost and in an inefficient way.

Why not have shorts pay a modest amount of interest over time? (The rate should be modest and capped, perhaps tied to inflation). This way, shorts can choose how long to hold their positions. This would be like what happens in traditional markets with short selling of equity.



Offline santaclause102

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Re: Different fees for different short holding periods
« Reply #12 on: September 27, 2014, 08:11:05 AM »
Quote
I expected the price to rise sometime in probably the next few months, not necessarily real soon...
the goal of the proposal is to avoid such free lunch an incentive traders to make more short/medium term predictions.

what is the "free lunch" here? long term risk for long term potential gain as well as potential loss.
an efficient market needs a cross-section of traders, from short to medium term, trend vs value etc. homogeneity means no need for the market, no trading.
It is easy to predict that btsx will go up in price at some point in the future. This contributes to the shorts overhang. The proposal would also incentivize traders to trade more medium term which will help track the price more accurately.

Offline mf-tzo

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Re: Different fees for different short holding periods
« Reply #13 on: September 27, 2014, 09:20:10 AM »
please do not impose fees and short expiration days to the shorts...I am having difficulty in deciding to short or not already. If fees are imposed then liquidity may be more reduced.

An expiration day of 6m - 1y maybe should be ok though and would make sense

Offline santaclause102

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Re: Different fees for different short holding periods
« Reply #14 on: September 27, 2014, 09:24:28 AM »
please do not impose fees and short expiration days to the shorts...I am having difficulty in deciding to short or not already. If fees are imposed then liquidity may be more reduced.

An expiration day of 6m - 1y maybe should be ok though and would make sense
It is a good thing (for the overall system) that you are on the fence. Liquidity should be about equal on both sides.

 

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