Author Topic: my plan to adjust SQP  (Read 4820 times)

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Xeldal

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Re: my plan to adjust SQP
« Reply #45 on: December 02, 2015, 01:36:43 am »

Benefit: Margin calls should be avoided unless absolutely necessary since it takes smartcoins out of circulation when the market is too thin to begin with. The most accurate/liquid market should be used to establish when a market call occurs, and at this moment the feed is a best. Feed is 100% SQP.


If you want to avoid margin calls, why not just reduce the margin call limit?  Instead of triggering at 175% collateralization, trigger at 150% or lower.

Its my understanding that SQP is on its way out, so perhaps we shouldn't be designing around it.  But in any event I think this SQP limit should not be reduced to 1000.  If smartcoins are designed to trade at a premium,  selling the smartcoin at the feed is the worst deal you should ever expect to get.  Margin call orders, as they approach <100% collateralization are the most urgently needed to fill.   You don't put the most urgent need at the least desirable price.  It may never get filled. 

I'd suggested elsewhere having margin call only trigger if the feed crosses your limit. Like BTS-0.9  Only then would it reach out and try to fill the order, but it's restricted by a limit, again like BTS-0.9  ;  As the feed moves beyond your margin call limit, the urgency to fill the order is greater.  The limit could start at 0% of the feed once triggered, and slowly extend out, up to 10% or more as it approaches black swan <100% collateralization. 

Offline maqifrnswa

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Re: my plan to adjust SQP
« Reply #46 on: December 02, 2015, 03:04:40 am »

Benefit: Margin calls should be avoided unless absolutely necessary since it takes smartcoins out of circulation when the market is too thin to begin with. The most accurate/liquid market should be used to establish when a market call occurs, and at this moment the feed is a best. Feed is 100% SQP.


If you want to avoid margin calls, why not just reduce the margin call limit?  Instead of triggering at 175% collateralization, trigger at 150% or lower.

Its my understanding that SQP is on its way out, so perhaps we shouldn't be designing around it.  But in any event I think this SQP limit should not be reduced to 1000.  If smartcoins are designed to trade at a premium,  selling the smartcoin at the feed is the worst deal you should ever expect to get.  Margin call orders, as they approach <100% collateralization are the most urgently needed to fill.   You don't put the most urgent need at the least desirable price.  It may never get filled. 

I'd suggested elsewhere having margin call only trigger if the feed crosses your limit. Like BTS-0.9  Only then would it reach out and try to fill the order, but it's restricted by a limit, again like BTS-0.9  ;  As the feed moves beyond your margin call limit, the urgency to fill the order is greater.  The limit could start at 0% of the feed once triggered, and slowly extend out, up to 10% or more as it approaches black swan <100% collateralization.

I deleted my post after thinking a bit more, sorry for the noise. (I was hoping it would be deleted before anyone saw it!)

I agree with you that SQP shouldn't be used to avoid margin calls. It also shouldn't be 100% for the reason you give: those calls urgently need to be filled, and they won't at 100% SQP.

I didn't know SQP was going to be removed; but I did know that margin calls will only be triggered if the feed crosses your margin call limit:
https://github.com/cryptonomex/graphene/issues/436
https://github.com/cryptonomex/graphene/compare/436-fork-feed-protect

Even with this change you probably need some SQP to protect shorts and prevent margin calls from accidentally triggering a blackswan in a thin market.

Given that margin calls will only be triggered if the feed crosses your margin limit:
--In a normal market where bid/ask is within 10% of the feed (see current bitUSD:BTS), SQP doesn't really do much except protect shorts from being "ripped off." Shorts see this as a penalty, but the bitUSD has to come from somewhere and SQP limits how big the penalty will be. In a liquid market, you shouldn't even need SQP as there should be enough for sale at market rates. SQP can't be 0, because they have to be cleared from somewhere otherwise margin calls and collateral are meaningless.

--In a broken market where bid/ask is greater than 10% from the feed (see current bitBTC:BTS), SQP creates an invisible buy wall that slows the market from converging to the peg. Someone's going to have to bite the bullet and short to clear out all the margin calls, otherwise price will linger at feed+10%.

SQP also helps me price risk - if the biggest penalty I can pay is 10%, I know that anything I short greater than 10% should be immune to risk associated with bitASSET:ASSET spread.
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Xeldal

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Re: my plan to adjust SQP
« Reply #47 on: December 02, 2015, 03:29:34 am »

I didn't know SQP was going to be removed; but I did know that margin calls will only be triggered if the feed crosses your margin call limit:
https://github.com/cryptonomex/graphene/issues/436
https://github.com/cryptonomex/graphene/compare/436-fork-feed-protect


You're correct.  That's what I understood as well.  Similar to how it used to work.  We never called it SQP before this current set of rules, so I guess that's why I mistakenly say its going away.   :)