I believe SQP rule is misguided and adds an unnecessary level of complication with ultimately no benefit. Currently we are lying to shorts about where/when their positions will/can be called.
If your goal is to encourage shorts to put up more collateral, simply raise the minimum collateral requirement.
If your goal is to reduce dependence on the feed, increase liquidity. Ill-liquid markets *should be heavily feed based.
If the information we give to the shorter is " your margin call price is feed price x " then they should never be called if the feed price is above x. Currently they can be called when the price (in all other markets) is upto 10% above x (their prescribed call price). This is a terrible practice IMO. Initially, shorts could be called upto an unbelievable 50% above their margin call price.
In effect SQP just raises the price at which shorts can be forced margin called. regardless of whether the fair price/ feed is above their prescribed margin call rate.
This really needs to be gotten rid of IMO. Or the ACTUAL margin call rate needs to be communicated (Call rate * (1 + SQP percentage))
In nearly every way, I think the rules under bts1 for margin calls are preferable.
So the main thing is the discrepancy between your personal margin-call price displayed in the GUI and the actual margin-call execution price you can get on an ill-liquid market (10% or previously 50% above the feed).
And the problem is those two prices can be quite far from each other: you expect to be margin-called at price x but the margin call actually executes at price y.
Do I understand your point correctly?
That is certainly part of it. It is not clear to the user that his margin call will be based on the bid, and not like prior BTS1 rules, based on the feed.
I think the conclusion of this debate might be: why do we have a feed at all? If you can't use SQP without liquidity, and if you have liquidity, you don't need a feed; What good is the feed? outside of a settlement rate which we claim should ideally never be necessary to use.
I have to admit, that basing the margin call on the bid (at the exchange, not from outside the exchange) makes sense and is how every exchange out there would do it, and rightfully so as they intend to remain solvent. We just saw a margin event on polo as an example. Obviously there are no feeds involved. The problem is, an exchange would not likely open margin accounts to trade an asset that was not liquid, and our MPA SmartCoins can not exist without margin accounts. Its unavoidable. So to protect illiquid markets the margin call should be based on the feed...or the market should not be able to trade without some very large level market depth liquidity. Which currently none of our MPA's qualify for and if they did the feed would never come into play especially at a 50% SQP.
In the case of massive liquidity, the feeds are mostly irrelevant and an SQP approach can work, but only because its unnecessary and irrelevant.
Given that margin accounts are by default required to have a functioning SmartCoin. I believe more weight, not less, should be put on the feeds, to protect the backbone of the SmartCoin markets, until the market is so large that they are perhaps inconsequential.