STP-10: VIP perp trading fees

Author	Cavalier
Status	Draft
Implementor	TBD
Release	TBD
Created	2023-11-21

Simple Summary

This proposal authorizes the Treasury Council (TC) to allocate up to 500,000 SNX for discretionary rebates to perp traders who exceed $100m monthly notional trade volume. The goal of the program is to reduce effective Maker fees by 1.5bps to 0.5bps, and Taker fees by 4bps to 2bps for qualifying traders.

Abstract

Allocate up to 500k SNX to rebate Maker fees by 1.5ps and Taker by 4bps for, approved traders with over $100m notional volume per month on eligible markets.

Motivation

In order to maintain neutral skew with growing volume and open interest caps, large volume traders are needed. Large volume perp traders are typically programmatic and require incentives to justify the technical investment to trade Synthetix perps.

Specification

Overview

This proposal seeks to allocate up to 500k SNX for fee rebates for qualifying traders. Traders expecting to trade more than $100m notional per month can apply to the TC. Upon reaching $100m notional trading volume per month, the TC will at its discretion rebate 1.5bps of Maker fees and 4bps of Taker fees in SNX to the trading address. Front ends will not be eligible to claim the rebate, but could do so on behalf of their qualifying users. Eligible markets are BTC, ETH, XRP, USDT, SOL, BNB, DOGE, ETHBTC.

Rationale

Reducing the effective fees will attract large volume traders and improve the return on investment to integrate with Synthetix Perps. Large traders increase volume and fees for the protocol, and are often interested in arbitrage which reduces skew. Improved skew balance reduces delta exposure and risk to LPs, and could enable larger OI caps and lower overall fees.

Fees are currently 2bp Maker and 6bps Taker on popular markets like ETH and BTC
Rebating fees down to 0.5bps on $100m Maker volume will cost 5,000 SNX (@$3)
Rebating fees down to 2bps on $100m Taker volume will cost 13,333 SNX (@$3)
Split evenly between Maker and Taker volume, 500k SNX will rebate $5.45b in notional volume to 0.5/2bps fees - approximately the total volume traded over the last month

Financial Specification

The applicable period for this incentive program will be split into discrete months.

Upon agreement with each trader, this STP will allow for up to 83,000 SNX per trader, per 30 days of trading, starting with the first trade from the wallet address provided by the trader. Continuation past each 30-day period will be subject to mutual agreement.

In total, this STP allows for up to 500k SNX for fee rebates to approved traders. The fee/volume tool will be used to calculate trading volumes. The SNX 7-day TWAP price at UTC midnight of final night will be used to rebate Maker/Taker fees to 0.5/2bps.

If it is determined that bad behavior is undertaken, putting at risk the integrity or the stability of the Synthetix protocol, the Treasury Council has the right to unilaterally suspend fee rebates.