bsip#13: Contract for Difference (CFD) trading - or Collaterized trading !

[Shentist]

BSIP: 0013
Title: Contract for Difference (CFD) trading - or Collaterized trading !
Authors: Frank Ahrens (shentist) <aktivpassiv@yahoo.com>
Status: Draft 
Type: [ Informational | Protocol ]
Created: 2016-01-27
Discussion: https://bitsharestalk.org/index.php/topic,21110.0.html

Abstract

With this paper i propose to make Collaterized trading availalbe with settlement available for both sides anytime. If you are not familiar with Contract for Difference (CDF) you can take a look here https://en.wikipedia.org/wiki/Contract_for_difference

Motivation

I think we should provide more possibilities to our users how they can trade assets on BitShares, and this is a really popular way to do it. The goal of a normal bitAsset is to give one party the abilility to lock some value up and the other party will go long the underlying (most in the cases BTS). With this proposal both parties are just speculating on the rise or fall of the tracked asset.

Rational

Specifications

Parameters we can use and change:

• How much collateral do you need to start a trade, this will set the risk profil of a market or the leverage - Percentage of collateral (feedprice/2*percentage)
• Percentage of collateral left to get a margin call (percentage/100)
• Settleprice away from feedprice ( >= 0 ) (30/100)
  -Percentage of splitting fees (20% network/20% FBA/workercontract /50% issuer)
• Time to make it possible to settle the position after agreeing on a contract (x hours)

Discussion

An Example:

• Bitcoin (BTC) exchangerate is in this example 130.000 BTS starting rate
• in this example we will use a 50% collateral (initial) requirement

market rules:

• all orders are matched on the feedprice
• a trader can choose to settle 1% away from the feedprice
• if someone settles the opposite trader with the least collateral will be (forced settled)

Party A wants to short 1 BTC against BTS
Party B wants to go long 1 BTC against BTS

With the BitShares powered CFD trading they will find a market where they can place their orders:

• A places an order to short 1 BTC
• B places an order to long 1 BTC
• they are matched on the feedprice and the collateral is locked on both sides , each 65.000 BTS

The price of 1 BTC to BTS is now moving to 120.000 BTS

The collateral of A is now worth 65.000 BTS + 10.000 BTS from the moved price
The collateral of B is now worht 65.000 BTS - 10.000 BTS from the moved price

B wants to cut his losses low so he dicides to settle his position. In our example party A is forced to settle too, but in a running market the "least" collaterized party on the opposite side will be forced out of his position.

So B settle and he get instantly 55.000 BTS back and lost 10.000 BTS and Party A was settled and gets 75.000 BTS back.

To disuss:

1. Is it good to settle anytime or do we give something like. For the first 10 days you can not forced out of your position?

Summary for Shareholders

In my proposal i assume we need people who will create markets like "50% collaterized BTC market"

• the markets needs feedprices

In this markets the issue can take a fee and we need to split this fees to (network, referral, FBA/worker and market issuer)

Copyright

See Also

[abitmore]

I do see this a new market in Dex, it will bring more revenue if people trade on this market.
However I haven't seen how this market will help liquidity of smart coins (which I think is high priority).

[sunburntcat]

This looks like a cool trading exercise. I think a 50% initial collateral is very risky, but this could also bring more people into the market

[rngl4b]

Has this conversation continued elsewhere?
Do you think it deserves more consideration now, next to atomic swap contracts, liquidity pools, relay networks, etc?