BSIP74: Margin Call Fee Ratio

[shulthz]

When the margin call was closed by the market，the system can charge the shorter penalty fees from the transaction of margin call.

The margin call penalty fees will place in a insurance fund.

The penalty fees can be 0.1% ~ ?%（Adjusted by the community）.

This will encourage the shorter to close the margin in time.
This wll suppress the aggressive shorter partly to reduce the global systematic risk.
The insurance fund will play a role in some place.
MSSR still will be MSSR.

When the shoter was be margin called, he will sell the bts to get the BITASSET to close the position, he sold 1 bts and got 0.4 bitcny, so the system charge 10% from the 0.4 bitcny as the penalty fees.

[pmconrad]

Thanks.

IMO it makes little sense to open many issues here with individual ideas about how to optimize MPAs. Better discuss elsewhere and come up with one BSIP containing the results of the discussion.

[abitmore]

IMHO charging a fee would cause less margin calls being bought thus lead to a bigger premium in a downtrend. Due to the impossible trinity, we have to accept trade-offs. If we want to improve one side, the other side would get weaken.

For optimizing MPAs, perhaps we can wait for @biophil's project: https://bitsharestalk.org/index.php?topic=28340.0 and/or work along with his team.

Adding more parameters so the community can tune is generally good IMHO, more tools means greater flexibility. However, more tools also means greater complexity, we should have guidelines about how to tune the parameters, when should tune what and etc.

[shulthz]

Charge the fees was independent，MSSR still is 1.02, it wouldn't cause less margin calls being bought, the margin calls still will be eaten like now with MSSR=1.02.

The research didn't have a exact name，maybe one month, maybe one year, and the result need to test and will change too much.

Some project of MPAs have charged this fee for a long time, didn't find any problems, i think we can learn somethings from it.

[abitmore]

If to charge extra fee from collateral, that means the debt position would lose more collateral (than current rule) when it's partially filled, that means it's harder for the debt position to return to a healthy CR, that means stronger sell pressure, that means it's closer to black swan.

[shulthz]

If to charge extra fee from collateral, that means the debt position would lose more collateral (than current rule) when it's partially filled, that means it's harder for the debt position to return to a healthy CR, that means stronger sell pressure, that means it's closer to black swan.

We didn't charge extra fee from collateral, we charge the fee from the transaction of margin call.

Someone borrow 100 bitcny when bts price is 1 bitcny, CR is 1.75, he collateralized 175 bts;
When the CR down to 1.35, his position was closed by the market, the system will sell 175 bts in price 0.77bitcny/MSSR=0.756 bitcny/BTS for 132.35 bitcny to close the position.
The system charge 10% penalty fees from the transaction 132.35 bitcny, the shorter will get 119.115 bitcny, paid the debit 100 bitcny, and he still got 19.115 bitcny.

Yes, as the current rule, when he set the target CR 1.75, he will need to sell a little more bts for the target CR.

[pmconrad]

You can't buy more than the full debt. If you want to charge a fee you must take it from the collateral. (Suppose there was only one shorter - how would you buy more than the existing supply?)

In your example, CR = 1.35 means price is 1.75/1.35 (about 1.3) BTS/CNY. So the call buys 100 CNY for 130 BTS. You can take another 10% (13 BTS) as fee and return 32 BTS (=175-130-13) to the shorter.

The effect is the same as with a higher MSSR - in case of a partial fill, the remaining collateral ratio will improve less, because more collateral is spent. (Even if you take the fee from the CNY side the effect will be the same because less debt is paid back.)

[shulthz]

The penalty fees will not play the role like MSSR.

Take the fee from the CNY and take the fee from the BTS which will be sold is different:

The shorter set the target CR 1.75,
MSSR=1.02, he will need to sell 76 bts in 0.756 bitcny/BTS;
MSSR=1.10, he will need to sell 100 bts in 0.7 bitcny/BTS

1. Take the 10% fee from the CNY, MSSR=1.02
   he will need to sell 98.3 bts in 0.756 bitcny/BTS, but in practice, he maybe sell the bts from 0.78 to 0.756 bitcny/BTS.
2. Take the 10% fee from the bts which will be sold, MSSR=1.02
   he will need to sell 88.47 bts in 0.756 bitcny/BTS, and will be charged 9.83 bts as the fee，total paid：98.3 bts.

So, charge the fee from the collateral will have the smaller sell pressure than charge the fee from the CNY.

@clockworkgr

[abitmore]

@shulthz you kept talking about fully filled debt positions. I and @pmconrad concerned more about partially filled positions. It's different. I agree that there is little risk if we charge some when closing a position. However, the positions that are too big thus hard to close will be impacted as well. For example, if you have a position with 100 BTS collateral, it's easy to close if sell all, market price won't change much; if you have a position with 10,000,000 BTS, even you want to sell all collateral, likely there is no so big buy support in the market.

[shulthz]

I have thought about the target CR, the amount of bts which was sold is less than the MSSR=1.10, didn't take too much sell pressure.
Bitcny have the 600 million highest supply and now have 70 million, and 400 million was digested by the market with MSSR=1.10 and no target CR.
Charge the shorter penalty fees only sell a little more bts in feed price/MSSR, and didn't give the price shock.
The sell pressure mainly come from the MSSR and the debit which were very closed to the MCR.
The most of the position was be eaten when the market bounced back.
The target CR was used by people, if the people didn't want to use it, it will not decrease the sell pressure.
If you have a position with 10,000,000 BTS and want to close it, pay back the debit and wait the feed price arise is the best useful way, the market will hard to close it in any conditions and maybe the market didn't want to eat it.
We have MSSR=1.10 for a long time, hardly see people talking the price shock and sell pressure with the MSSR.

[abitmore]

To be clear, I'm not against adding more features/tools. Just discussing to try to find out the pros and cons and guidelines about using the features/tools.

Charge the shorter penalty fees only sell a little more bts in feed price/MSSR, and didn't give the price shock.

Every little bit counts. The last straw that broke the camel's back was not heavy at all.

The sell pressure mainly come from the MSSR and the debit which were very closed to the MCR.

IMHO sell pressure (actually the demand to close debt positions in a downtrend) is mainly due to MCR but not MSSR, although higher MSSR may lead to bigger premium in a downtrend which gives people an illusion "sell pressure is high" so may probably cause people to dump BTS in other markets. Reducing MCR can significantly reduce sell pressure but may lead to lower overall CR thus easier/closer to black swan. This is off-topic though.

If you have a position with 10,000,000 BTS and want to close it, pay back the debit and wait

It doesn't make sense to argue this way. Please focus on the topic. Although people can have fiat or other cryptocurrencies or a house to sell for bitCNY, or even loan elsewhere or get money by whatever means, it is off-topic.

The situation is, there is only BTS in collateral, the collateral will be listed for sale automatically if CR <= MCR. This IS sell pressure. If the the owner of the debt position does nothing, charging extra fees doesn't help for mitigating sell pressure.

Here I repeat again, please focus on topic.

[shulthz]

Focus on topic:

The shorter set the target CR 1.75, and his current CR is 1.35.
MSSR=1.02, he will need to sell 76 bts in 0.756 bitcny/BTS;
MSSR=1.10, he will need to sell 100 bts in 0.7 bitcny/BTS

1. Take the 10% fee from the CNY, MSSR=1.02
   he will need to sell 98.3 bts in 0.756 bitcny/BTS, but in practice, he maybe sell the bts from 0.78 to 0.756 bitcny/BTS.
2. Take the 10% fee from the bts which will be sold, MSSR=1.02
   he will need to sell 88.47 bts in 0.756 bitcny/BTS, and will be charged 9.83 bts as the fee，total paid：98.3 bts.

Charge fee(less than 15%) will give less sell pressure than MSSR=1.10 if we charge bts.
Charge fee(mor than 10%) will give more sell pressure than MSSR=1.10 if we charge CNY.

Sell pressure was influenced by many factors, not only MCR and MSSR, if charge fee take the sell pressure not more than MSSR=1.10, I don't think it's a problem.

Off-topic: When we change MSSR=1.02, the main influence is the price shock, but it also reduce the sell presure.

"If the owner of the debt position does nothing, charging extra fees doesn't help for mitigating sell pressure."
Mitigating sell pressure was determined by the emotion of market, lower or higher MSSR or MCR will have less help with it when the market determined not to eat it. I think it is Off-topic.
The purpose of charge fee is not designed to help for mitigating sell pressure.
It's very hard and difficult to cover everything.

[bitcrab]

it lead to nothing but less borrowing and high premium and serious shortage of smartoin.
totally against this kind of idea, no doubt.

[shulthz]

“high premium”? where it come from?
"serious shortage of smartoin"? how did you got this conclusion?
How do you know it lead to nothing? can you prove it?

[bitcrab]

“high premium”? where it come from?
"serious shortage of smartoin"? how did you got this conclusion?
How do you know it lead to nothing? can you prove it?

you can read here to get a full understanding: https://bitsharestalk.org/index.php?topic=28367.0