Merge pull request #58 from bitshares/bsip34
Add BSIP 34: Always Trigger Margin Call When Call Price Above Or At Price Feed
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bsip-0034.md
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bsip-0034.md
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BSIP: 0034
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Title: Always Trigger Margin Call When Call Price Above Or At Price Feed
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Author: Abit More <https://github.com/abitmore>
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Status: Draft
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Type: Protocol
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Created: 2018-02-18
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Discussion: https://github.com/bitshares/bitshares-core/issues/606
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Replaces: -
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Worker: To be done
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# Abstract
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Currently, in BitShares, a short position may be margin called only when both
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two requirements are met:
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* call price is above or equal to median price feed
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* no limit order on the book is buying collateral with price higher than the
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short position's call price
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This behavior has led to certain confusion and anger among market participants.
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This BSIP proposes a new behavior to improve the situation: drop the second
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requirement, trigger margin call when the first requirement is met.
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# Motivation
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To avoid ambiguity, in this article, all prices are in terms of
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`debt asset / collateral asset`, aka how much debt asset per collateral
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asset. A bid is an order to buy collateral asset with debt asset.
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Generally, a short position may be margin called when its collateral ratio is
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below or equal to maintenance collateral ratio (MCR).
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However, to calculate collateral ratio, a fair collateral price is needed.
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In BitShares, there are two data sources can be used to decide the fair
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collateral price:
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* the internal market
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* the price feeds
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Currently, both data sources are used. Specifically, collateral price is decided
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as the higher one between the highest bid price on the internal market and the
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median price feed. That said, when a short position's collateral ratio has
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fallen to below or equal to MCR according to median price feed (in this case,
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call price of the short position is above or equal to median price feed), if
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there is a bid on the market with high price, the short position won't be margin
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called.
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This mechanism has led to certain confusion and anger among market participants.
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* there are often orders with overlapping price on the book but didn't fill
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* there are often short positions selling collaterals with low prices, but
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traders are unable to buy at those prices
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* it often causes borrowers to sell collaterals at a low price when have chances
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to sell at higher price
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* market manipulators / arbitrage traders have more chances to force borrowers
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to sell collaterals at lower price
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This BSIP effectively proposes a new behavior: derive the fair collateral price
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only from price feeds.
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# Rationale
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Since price feeds are provided by a set of chosen producers, the median price
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feed is usually considered trustworthy. On the other hand, instant market
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price is not as reliable, especially for the markets with poor depth, so it's
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a rather limited supplement for calculating collateral price.
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At this moment, changing the rule to only use median price feed will clear away
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the confusion the end users may have, while still keeping the derived collateral
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price fair to an extent.
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After this change is done, placing a new limit order will no longer trigger a
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margin call, cancelling a limit order or expiring a limit order will no longer
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trigger a margin call as well, that means we don't need to check for new margin
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calls nor black swan events in those scenarios, so we'll gain a side benefit on
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performance.
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# Specifications
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In `check_call_orders(...)` function of `database` class, when matching a call
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order with a limit order, there is a check:
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`if( match_price > ~call_itr->call_price )`, when the result is `true`,
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processing will be ended and `margin_called` will be returned.
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Need to skip the check and the following `return` action.
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In `do_apply(...)` function of `limit_order_cancel_evaluator` class, and
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similar code blocks after a limit order object is removed, no longer need to
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call `check_call_orders(...)` function of `database` class.
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# Discussion
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[to be added if any]
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# Summary for Shareholders
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[to be added if any]
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# Copyright
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This document is placed in the public domain.
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# See Also
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* https://github.com/bitshares/bitshares-core/issues/606
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* https://bitsharestalk.org/index.php?topic=25926.0
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