IIP-40: ETH2x-FLI Parameter Update #5

IIP: 40 Title: ETH2x-FLI Parameter Update #5 Status: Proposed Authors: Allan Gulley (@allan.g), Cormac Daly (@afromac) Discussions-to: https://gov.indexcoop.com/t/iip-xx-eth2x-fli-parameter-update-5/1495 Created: 2021-05-11

Simple Summary

Update max trade size from 400 ETH to 250 ETH.

Abstract

Adjust the following parameters on the ETH2x-FLI:

Lower max trade size from 400 ETH to 250 ETH.

Motivation

The ETH2x-FLI product has several parameters that can be updated through governance. For more information on frequently updated parameters, view this page. The max trade size is the maximum amount of collateral asset allowed to be exchanged in a single transaction. The rebalance will be broken down across multiple transactions if the total rebalance notional value is above the max trade size parameter.

Since the last parameter update, the price of ETH has increased significantly (~74%) while liquidity on DEXs has generally stayed the same. In order to target a <0.6% price impact per trade and minimize market impact, we want to lower the max trade size to 250 ETH. Limiting the max trade size to 250 ETH also provides a buffer if the price of ETH continues to increase.

The max trade size for ETH2x-FLI was adjusted on 4/22/2021 for the same reasons when the price of ETH reached ~$2,400; please see IIP-35 for details.

FOR

  • Lower ETH-FLI max trade size from 400 ETH to 250 ETH.

AGAINST

  • Do not lower ETH-FLI max trade size.

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