[OFFICIAL]Bitfinex.com first Bitcoin P2P lending platform for leverage trading

[janos666]

Is there a way to update a simple margin trade position with stop loss and/or take profit options (without closing the active order and reopening a new order with one or more of these parameters included)?

[lg1500]

There is enough swap, as when the contracts run out - it frees up a lot of swap (unless the lender refuses to renew).  The question is whether they'll try a short squeeze, or a swap squeeze. I'm thinking a swap squeeze is more profitable and we'll see 1% interest rates.

and bitfinex let this happen, and not answer for any mails

[BearGod]

Hi, I had an open margin long with 363 coins from 482, and I had one sell order for 50 coins at 394.  My order got hit and it closed most of my margin long coins down to 192, and only lowered my base for the 50 coins that were hit.  There are reported errors all across the board, BFX please help, wth happened?

Have you emailed support@bitfinex.com? That would be the quickest way to get this investigated, but if you give me your username or email, I can forward it along to support.

Username: Herojuana

Thanks for quick reply, I sent support an email already, if you could get me ahead of the line, that would be great.

No responses from BFX all day. I have lost over 3.4k because of this glitch today, and now I cant get my buy in as low as it was.  BFX really screwed me here, I hope something can be done to make it right, or I will move most my coins out.

Bummer I really like trading here.

[noggin-scratcher]

Is there a way to update a simple margin trade position with stop loss and/or take profit options (without closing the active order and reopening a new order with one or more of these parameters included)?

You're confused about how those things work - they're not parameters to an order, but separate order types that you can enter at any time.

A stop's mechanism is "When the price gets this high, trigger a market buy" (for a stop buy) or "When the price gets this low, trigger a market sell" (for a stop sell). It's a happy coincidence that you can use that order type as a way to add some safety to a prior trade by, for example, selling off your position automatically if the market turns downward.

And a 'take profit', unless I'm mistaken, is just a limit order set somewhere off in the 'favourable' direction, waiting to cash you out when the market gets there.

[BitBits]

Is there a way to update a simple margin trade position with stop loss and/or take profit options (without closing the active order and reopening a new order with one or more of these parameters included)?

Can't really think of anything that could possibly prevent you from closing your old order and creating a new one. It doesn't cost anything.
So yes, there is a way - you just cancel existing order and create new one.

[Delarock]

Is there a way to update a simple margin trade position with stop loss and/or take profit options (without closing the active order and reopening a new order with one or more of these parameters included)?

You're confused about how those things work - they're not parameters to an order, but separate order types that you can enter at any time.

A stop's mechanism is "When the price gets this high, trigger a market buy" (for a stop buy) or "When the price gets this low, trigger a market sell" (for a stop sell). It's a happy coincidence that you can use that order type as a way to add some safety to a prior trade by, for example, selling off your position automatically if the market turns downward.

And a 'take profit', unless I'm mistaken, is just a limit order set somewhere off in the 'favourable' direction, waiting to cash you out when the market gets there.

It would be more precise if they had "stop limit" orders as an option. Any idea why this option isn't yet available?

[janos666]

Is there a way to update a simple margin trade position with stop loss and/or take profit options (without closing the active order and reopening a new order with one or more of these parameters included)?

You're confused about how those things work - they're not parameters to an order, but separate order types that you can enter at any time.

A stop's mechanism is "When the price gets this high, trigger a market buy" (for a stop buy) or "When the price gets this low, trigger a market sell" (for a stop sell). It's a happy coincidence that you can use that order type as a way to add some safety to a prior trade by, for example, selling off your position automatically if the market turns downward.

And a 'take profit', unless I'm mistaken, is just a limit order set somewhere off in the 'favourable' direction, waiting to cash you out when the market gets there.

Yes, I am a little confused about how Bitfinex's behavior can be programmed (preferably without utilizing their API with a trade bot).
I find their "How it works" a little oversimplified. I would prefer a more detailed documentation (may be including some examples) instead of this short and easy to read text about the very basics.

I am not a veteran trader. I didn't even do margin trades before. And every BTC exchanges are slightly different anyway, let alone that they might change over time (even without proper notice).

For example, I had used Kraken before. At first I could place multiple orders and let the executed one(s) indirectly cancel the other(s) (all orders were effective on the same common fund(s) which could run out) or create advanced order(s) (still possibly coexisting redundantly while overlapping on the same fund(s) for indirect cancellation by the other order(s), so it could possibly get too redundant on multiple levels...). Later they changed and got rid of the redundancies but they were too harsh. I had to start with their advanced order, I couldn't just place multiple orders on the same funds anymore (even if one advanced order offered slightly less than multiple orders could, still without too much redundancy). Note that I have never read about all this in their "documentation". I learned using Kraken by trial and error and noticed the change on the same way... And now it seems I have to do this with Bitfinex as well (learn by experimenting with small amounts).

Now back to Bitfinex, I have had an open position, not an open order when I posted. (I closed it in the mean time.) I bought some BTC with leveraged $ (based on my BTC deposit).
I learned by trial and error that OCO parameters affect the order but not the position. I ended up buying less BTC than I could and I wished to (just to see if the OCO limit stops buying on market price as price rises as liquidity disappears). However, I didn't have anything at place which could automatically close my position while I slept (I missed some possible profit because I closed the position @401 after waking up, instead of @410 where I hoped to close).

Ahh, well, it was still closed with profit (not bad after some pause and a resume on a new exchange) and I did learn a bit about the OCO parameters.
But I still don't know how to automate "profit taking" and/or "stopping the loss" on open positions (not just on the yet to be executed orders).

--- I hope you will understand this question (bad English here...):
What happens with a margin buy produced open position when a parking limit price margin sell order kicks in?
Do I automatically buy the underlaying loaned asset from "myself" [effectively the loaner] (on leverage, if possible and required), thus effectively closing my old position without a loss (except the fee and interest + possible loss from a preset price gap) while smoothly switching sides from long to short around a fixed price (or with a preset gap in-between if I am willing to take some temporal loss)?
Or do I end up with coexisting, simultaneously opened long and short positions (with neither closing automatically until I run out of the credit limit on either ends)?

Is there a way to update a simple margin trade position with stop loss and/or take profit options (without closing the active order and reopening a new order with one or more of these parameters included)?

Can't really think of anything that could possibly prevent you from closing your old order and creating a new one. It doesn't cost anything.
So yes, there is a way - you just cancel existing order and create new one.

Not all of these are significant and/or apply to me right now (and it's improbable if all of these affect you at the same time) but these come to my mind:
- exchange/trade fee
- possibly higher leverage interest rate
- possibly worst market liquidity (with a slight chance that someone starts a mini-pump/dump right there, so price gets worse)

[QwertyCore]

You are saying the exact same thing as I am. The fact that there is only one variable rate means that everyone picks that one variable rate. So, it seems to me that the simplest way to fix that is to offer multiple variable rates, which you could do by using a delta from the FRR. Remember, the FRR is the average rate, so it is just a number like any other.

The absolute simplest way to fix it is to remove the FRR.  It does not seem like you are willing to entertain that idea.

First, let me say this, I think the FRR was a good idea at the time, when the swap market had active lenders and the returns where high. The FRR was a good way to let the lenders stay active if they were away from their keyboards for a while.  That is not the case now.  In the past the FRR was the exception, now it is the rule.

As I said before, I don't think the FRR can be fixed but if you will not entertain removing it I can supply you with some of my thoughts.

If your goal is to achieve a distribution of FRR I don't think that FRR±x will work to produce a bell curve of offers.  A distribution is a natural thing that does not exists when people are involved, much less when competing with each other.  One way or another the offers will coalesce around the FRR.

You could try to create multiple FRRs. Maybe a FRR for a 2, 7, 15 and 30 day term.  I do not see this working either as I think traders will most likely favour the 30 day.  If not, lenders will dump into whichever bucket is most profitable.  If for some (implausible) reason the buckets are filled equally, you will now have created 4 walls to deal with.  They might not be as high but I would wager that they will be within 0.01 percentage points of each other.  I also think that this will add more complication for the traders, but you would have to ask them.

You could address the issue by making the FRR less attractive to lenders to begin with.  The less attractive the FRR the less it will be used.  Some things that could be done:

• Higher fees for FRR swaps.  They need to be high enough to make a lender think about it, maybe an extra 15-20%.
• Do not float the active swaps.  You get the advantage of a floating rate for the initial offer but no advantage over a fix rate once the swap is made.
• Float the rate down but cap it at the rate is was accepted (traders would love this). I think this is a terrible idea but it is a thought.
• Apply a system wide offset to the true FRR (it's just a number, right?).  Have the new FRR offer rate be the true FRR+0.05.  You might still have a wall but it will be pushed away from the true FRR and give the fixed rate lenders some room to maneuver.
• Apply a system controlled variance to all FRR offers when they are put back in the queue.  This will allow you to create whatever distribution you would like.  Once again I would make the range from FRR to FRR+0.05.  You would need to break large offers into smaller chunks so the system can't be gamed.
• Delay adding a closed swap to the FRR queue by 12-24 hours.  (Good luck figuring out how to implement this one).
• Leverage the idea BitBits had.  Limit the amount of money in the FRR to a set value.  If a FRR swap is closed and there is room in the FRR, add it.  If not, the funds are returned to the lender's wallet until they make a manual offer or try the FRR again.
• Change how the FRR is calculated.  If you think about it, the FRR doesn't make any sense at all. Why use the mean?  Why not the median or mode?  Why base anything on existing swaps?  Should my new house mortgage be based on all current mortgages?  How does that reflect on what is happening now?
  Why not:
  
  • Pull a number out of thin air, say 0.2%?  It reflects the current market just a well as average based on the past.
  • Base the FRR on the weighted average of the rates in the current swap book.
  • Adjust the FRR so it reacts to upward movement quicker than downward pressure.
  • Base the FRR on just the last 12-24 hours of taken swap offers.
  • Adjust the FRR so that there is always a fixed amount or percentage dollars in offers above or below it.
  • Put a floor on the FRR, don't let it go below 0.15%.

Does anyone think any of these idea are viable?

Edit: Cleaned up trailing CRs.

[mjr]

Herojuana's 'problem' has been solved.

So, just so everyone knows...there was no glitch, the situation has been resolved. Could have been solved by looking at trade history.

[QwertyCore]

You are saying the exact same thing as I am. The fact that there is only one variable rate means that everyone picks that one variable rate. So, it seems to me that the simplest way to fix that is to offer multiple variable rates, which you could do by using a delta from the FRR. Remember, the FRR is the average rate, so it is just a number like any other.

The absolute simplest way to fix it...

Another thought:

Build even more on BitBits idea: Fill the FRR to a predetermined amount.  Once that bucket is filled, close it and open a new one at FRR+0.05.  Fill that and then open a new one at FRR+0.10.  Continue ad nauseam. You will need a mechanism to reset the rate buckets.  You could probably just wait 24 hours after the the first bucket is exhausted and then adjust the higher tiers down to the FRR.

[QwertyCore]

Does anyone else see their swaps churning?  A swap gets taken for an hour or so and then closed?

The same seem to be happening to the FRR bucket, it starts to be depleted to 70-80k and then refills to 250k or so.

[janos666]

Another thing I don't understand:
- ~10 BTC and ~20$ sits in my trading wallet
- I have no open orders or positions, my tables are all clean
- I tell the trading engine that I wish to buy 25 BTC at market price
- My order shows up as partially filled
- I manually refresh and find that my oder got closed but I have a position with something like 10.1234312 BTC or so

Is this normal?
- Should market orders automatically close as partially fulfilled after a short timeout?
- Is there a hardcoded limit on how far the price can reach out from the base?
- Are market orders supposed to pick up one matching order but not more (not even with the same price)?
- Are market orders supposed to pick up the orders with the closest price tag (with any number of underlaying orders) but not more orders from other price tags?

[nrd525]

You are saying the exact same thing as I am. The fact that there is only one variable rate means that everyone picks that one variable rate. So, it seems to me that the simplest way to fix that is to offer multiple variable rates, which you could do by using a delta from the FRR. Remember, the FRR is the average rate, so it is just a number like any other.

The absolute simplest way to fix it...

Another thought:

Build even more on BitBits idea: Fill the FRR to a predetermined amount.  Once that bucket is filled, close it and open a new one at FRR+0.05.  Fill that and then open a new one at FRR+0.10.  Continue ad nauseam. You will need a mechanism to reset the rate buckets.  You could probably just wait 24 hours after the the first bucket is exhausted and then adjust the higher tiers down to the FRR.

Limiting the size of the FRR is a bad idea.  The total number of swaps has increased by 5-10% in some weeks.  So allotting a fixed amount to the FRR won't work. Limiting the FRR to a percent of total swaps would also be tricky.  A limit would mess up people who use FRR auto-renew.

Ending the FRR is a very bad idea.  Some people have small amounts lent out and don't want to micro-manage.  My guess is these suggestions will be dominated by people with larger amounts and/or people who like to micro-manage.

What problems are there?
1. FRR slow to adjust - could shorten the period that the rate is based on.  Especially noticeable in the long downward trend of the FRR where I knew it was heading to 0.04% - but it took a long time.  However this is also the responsibility of people who had $4 million not lent out for not reducing their rate.  You don't want to shorten this period too much or the rate will vary too much, be prone to manipulation, and hurt borrowers.

2. Swap system is biased in favor of borrowers.  They can cancel loans and take better offers. Not sure how to fix this.  A possible limit to this is that lenders can move their money into another investment or go long themselves.

[l1za]

There is enough swap, as when the contracts run out - it frees up a lot of swap (unless the lender refuses to renew).  The question is whether they'll try a short squeeze, or a swap squeeze. I'm thinking a swap squeeze is more profitable and we'll see 1% interest rates.

and bitfinex let this happen, and not answer for any mails

Is there any update about this?

[DoubleSwapper]

You are saying the exact same thing as I am. The fact that there is only one variable rate means that everyone picks that one variable rate. So, it seems to me that the simplest way to fix that is to offer multiple variable rates, which you could do by using a delta from the FRR. Remember, the FRR is the average rate, so it is just a number like any other.

The absolute simplest way to fix it is to remove the FRR.  It does not seem like you are willing to entertain that idea.

First, let me say this, I think the FRR was a good idea at the time, when the swap market had active lenders and the returns where high. The FRR was a good way to let the lenders stay active if they were away from their keyboards for a while.  That is not the case now.  In the past the FRR was the exception, now it is the rule.

As I said before, I don't think the FRR can be fixed but if you will not entertain removing it I can supply you with some of my thoughts.

If your goal is to achieve a distribution of FRR I don't think that FRR±x will work to produce a bell curve of offers.  A distribution is a natural thing that does not exists when people are involved, much less when competing with each other.  One way or another the offers will coalesce around the FRR.

You could try to create multiple FRRs. Maybe a FRR for a 2, 7, 15 and 30 day term.  I do not see this working either as I think traders will most likely favour the 30 day.  If not, lenders will dump into whichever bucket is most profitable.  If for some (implausible) reason the buckets are filled equally, you will now have created 4 walls to deal with.  They might not be as high but I would wager that they will be within 0.01 percentage points of each other.  I also think that this will add more complication for the traders, but you would have to ask them.

You could address the issue by making the FRR less attractive to lenders to begin with.  The less attractive the FRR the less it will be used.  Some things that could be done:

• Higher fees for FRR swaps.  They need to be high enough to make a lender think about it, maybe an extra 15-20%.
• Do not float the active swaps.  You get the advantage of a floating rate for the initial offer but no advantage over a fix rate once the swap is made.
• Float the rate down but cap it at the rate is was accepted (traders would love this). I think this is a terrible idea but it is a thought.
• Apply a system wide offset to the true FRR (it's just a number, right?).  Have the new FRR offer rate be the true FRR+0.05.  You might still have a wall but it will be pushed away from the true FRR and give the fixed rate lenders some room to maneuver.
• Apply a system controlled variance to all FRR offers when they are put back in the queue.  This will allow you to create whatever distribution you would like.  Once again I would make the range from FRR to FRR+0.05.  You would need to break large offers into smaller chunks so the system can't be gamed.
• Delay adding a closed swap to the FRR queue by 12-24 hours.  (Good luck figuring out how to implement this one).
• Leverage the idea BitBits had.  Limit the amount of money in the FRR to a set value.  If a FRR swap is closed and there is room in the FRR, add it.  If not, the funds are returned to the lender's wallet until they make a manual offer or try the FRR again.
• Change how the FRR is calculated.  If you think about it, the FRR doesn't make any sense at all. Why use the mean?  Why not the median or mode?  Why base anything on existing swaps?  Should my new house mortgage be based on all current mortgages?  How does that reflect on what is happening now?
  Why not:
  
  • Pull a number out of thin air, say 0.2%?  It reflects the current market just a well as average based on the past.
  • Base the FRR on the weighted average of the rates in the current swap book.
  • Adjust the FRR so it reacts to upward movement quicker than downward pressure.
  • Base the FRR on just the last 12-24 hours of taken swap offers.
  • Adjust the FRR so that there is always a fixed amount or percentage dollars in offers above or below it.
  • Put a floor on the FRR, don't let it go below 0.15%.

Does anyone think any of these idea are viable?

Edit: Cleaned up trailing CRs.

Very sophisticated post. I've been a liquidity provider on BFX for quite some time managing a medium six figure position and I too vouch for either the complete removal of the FRR or the implementation of variable rate that tracks the current order book much more closely. The FRR seems very inelastic towards upward movement but gets drawn down quickly by downward pressure. There have been several very peculiar incidents involving the FRR that left me with sour taste.

A huge FRR wall of 3m+ has surpressed the swap rate for weeks slowly moving down like the sword of Damocles until it was finally chewed up in the 0.04% region leading to an immidiate violent upward spike. What's really unfortunate about that is that most of the FRR offers don't even get taken swiftly in a situation of increasing supply but contribute to the downward movement by building up this huge FRR wall. Then there have been incidents where after a huge chunk of orders the lowest available offer lies at 0.6% or something very high a 150k FRR offer gets posted at below 0.1% only to be immidiately slurped up. I feel the one using the FRR was screwed the most in that situation.

If you want to enable an automatic system that ensures sensible offers that get taken quickly you should orientate the FRR at the current offer book. For example let the system post the FRR just a pip below the current lowest offer of course adjusted to volume and offer size so that single small fake offers doesn't pull the rate down. This would ensure minimal influence of the FRR to the current order book and swap rate discovery.

In my personal opinion though no FRR is needed at all. The swap market is now mature enough and every player should finally understand that this is no savings account. Active management of one's own position should be encouraged not hindered.
The swap market is in a natural downtrend as BFX grows because increased visibility of the attractive conditions drags people's money onto BFX. The rate we should be looking at in the future is not 0.1% per day or even 0.05% but something along the lines of the prime interest rate only adjusted by the default risk of BFX, magnitudes lower than it is now.
No FRR used by lazy lenders is needed to fasten this downward spiral.
Logging into BFX 10 times a day for a minute to take a look at the book and post one's offers is not inhumane and should be the standard imho for the premium interest lenders are enjoying here.

Ending the FRR is a very bad idea.  Some people have small amounts lent out and don't want to micro-manage.  My guess is these suggestions will be dominated by people with larger amounts and/or people who like to micro-manage.

Correct. And this is absolutely how it should be. Someone who lends out $500 should have no real say on this because whether he gets 10% or 50% per year doesn't matter. It's pocket change either way while he contributes through lazy FRR lending to people with significant funds losing life changing amounts of money.

I am a liquidity provider and I won't delude myself. I want the rate as high as possible but I am reasonable and see how a rate of 1% per day is unwarranted and unhealthy (unless BFX has a huge default risk or we are in an epic bubble bullrun). As I laid out before the swap market is in a natural downtrend anyway and will be in the future for obvious reasons. All upward trends where merely achieved by reckless (and clever) manipulation.

[freakbits]

I provide only "small money" at flash return rate for 30 days, using the automatic settings, and my money is usually lent out.
I don't really feel that "wall" problem you're talking about. o_o

[QwertyCore]

You are saying the exact same thing as I am. The fact that there is only one variable rate means that everyone picks that one variable rate. So, it seems to me that the simplest way to fix that is to offer multiple variable rates, which you could do by using a delta from the FRR. Remember, the FRR is the average rate, so it is just a number like any other.

The absolute simplest way to fix it...

Another thought:

Build even more on BitBits idea: Fill the FRR to a predetermined amount.  Once that bucket is filled, close it and open a new one at FRR+0.05.  Fill that and then open a new one at FRR+0.10.  Continue ad nauseam. You will need a mechanism to reset the rate buckets.  You could probably just wait 24 hours after the the first bucket is exhausted and then adjust the higher tiers down to the FRR.

Limiting the size of the FRR is a bad idea.  The total number of swaps has increased by 5-10% in some weeks.  So allotting a fixed amount to the FRR won't work. Limiting the FRR to a percent of total swaps would also be tricky.  A limit would mess up people who use FRR auto-renew.

Ending the FRR is a very bad idea.  Some people have small amounts lent out and don't want to micro-manage.  My guess is these suggestions will be dominated by people with larger amounts and/or people who like to micro-manage.

What problems are there?
1. FRR slow to adjust - could shorten the period that the rate is based on.  Especially noticeable in the long downward trend of the FRR where I knew it was heading to 0.04% - but it took a long time.  However this is also the responsibility of people who had $4 million not lent out for not reducing their rate.  You don't want to shorten this period too much or the rate will vary too much, be prone to manipulation, and hurt borrowers.

2. Swap system is biased in favor of borrowers.  They can cancel loans and take better offers. Not sure how to fix this.  A possible limit to this is that lenders can move their money into another investment or go long themselves.

I suppose it depends on how you define limiting the FRR.  The total amount in the variable rate fund would not be limited, only the amount of offers at the lowest tier.  As more was added, it would create new tiers at a higher interest rate.  As the lower tiers are consumed, and after a set time period, the higher rate tiers would propagate down to the lowest FRR tier.  Calculating a percentage of the total swaps would not be difficult as it would be done at the time the tier is created.  The FRR auto-renew is not affected since there is no limit on the amount of money in the FRR; the auto-renew money might not be offered at the lowest rate but then that is the point.

As for ending the FRR being a bad idea, I would disagree and I think I have made my (belaboured) point in prior posts.  That being said, you are probably correct on who is participating in this discussion.

I don't think I can fully agree with the statement that the system is biased in favour of the borrowers.  The nature of margin trading dictates the basic rules.

What do you think of the other ideas I put forward?  Do any of them appeal to you?

[QwertyCore]

You are saying the exact same thing as I am. The fact that there is only one variable rate means that everyone picks that one variable rate. So, it seems to me that the simplest way to fix that is to offer multiple variable rates, which you could do by using a delta from the FRR. Remember, the FRR is the average rate, so it is just a number like any other.

The absolute simplest way to fix it is to remove the FRR.  It does not seem like you are willing to entertain that idea.

First, let me say this, I think the FRR was a good idea at the time, when the swap market had active lenders and the returns where high. The FRR was a good way to let the lenders stay active if they were away from their keyboards for a while.  That is not the case now.  In the past the FRR was the exception, now it is the rule.

As I said before, I don't think the FRR can be fixed but if you will not entertain removing it I can supply you with some of my thoughts.

If your goal is to achieve a distribution of FRR I don't think that FRR±x will work to produce a bell curve of offers.  A distribution is a natural thing that does not exists when people are involved, much less when competing with each other.  One way or another the offers will coalesce around the FRR.

You could try to create multiple FRRs. Maybe a FRR for a 2, 7, 15 and 30 day term.  I do not see this working either as I think traders will most likely favour the 30 day.  If not, lenders will dump into whichever bucket is most profitable.  If for some (implausible) reason the buckets are filled equally, you will now have created 4 walls to deal with.  They might not be as high but I would wager that they will be within 0.01 percentage points of each other.  I also think that this will add more complication for the traders, but you would have to ask them.

You could address the issue by making the FRR less attractive to lenders to begin with.  The less attractive the FRR the less it will be used.  Some things that could be done:

• Higher fees for FRR swaps.  They need to be high enough to make a lender think about it, maybe an extra 15-20%.
• Do not float the active swaps.  You get the advantage of a floating rate for the initial offer but no advantage over a fix rate once the swap is made.
• Float the rate down but cap it at the rate is was accepted (traders would love this). I think this is a terrible idea but it is a thought.
• Apply a system wide offset to the true FRR (it's just a number, right?).  Have the new FRR offer rate be the true FRR+0.05.  You might still have a wall but it will be pushed away from the true FRR and give the fixed rate lenders some room to maneuver.
• Apply a system controlled variance to all FRR offers when they are put back in the queue.  This will allow you to create whatever distribution you would like.  Once again I would make the range from FRR to FRR+0.05.  You would need to break large offers into smaller chunks so the system can't be gamed.
• Delay adding a closed swap to the FRR queue by 12-24 hours.  (Good luck figuring out how to implement this one).
• Leverage the idea BitBits had.  Limit the amount of money in the FRR to a set value.  If a FRR swap is closed and there is room in the FRR, add it.  If not, the funds are returned to the lender's wallet until they make a manual offer or try the FRR again.
• Change how the FRR is calculated.  If you think about it, the FRR doesn't make any sense at all. Why use the mean?  Why not the median or mode?  Why base anything on existing swaps?  Should my new house mortgage be based on all current mortgages?  How does that reflect on what is happening now?
  Why not:
  
  • Pull a number out of thin air, say 0.2%?  It reflects the current market just a well as average based on the past.
  • Base the FRR on the weighted average of the rates in the current swap book.
  • Adjust the FRR so it reacts to upward movement quicker than downward pressure.
  • Base the FRR on just the last 12-24 hours of taken swap offers.
  • Adjust the FRR so that there is always a fixed amount or percentage dollars in offers above or below it.
  • Put a floor on the FRR, don't let it go below 0.15%.

Does anyone think any of these idea are viable?

Edit: Cleaned up trailing CRs.

Very sophisticated post. I've been a liquidity provider on BFX for quite some time managing a medium six figure position and I too vouch for either the complete removal of the FRR or the implementation of variable rate that tracks the current order book much more closely. The FRR seems very inelastic towards upward movement but gets drawn down quickly by downward pressure. There have been several very peculiar incidents involving the FRR that left me with sour taste.

A huge FRR wall of 3m+ has surpressed the swap rate for weeks slowly moving down like the sword of Damocles until it was finally chewed up in the 0.04% region leading to an immidiate violent upward spike. What's really unfortunate about that is that most of the FRR offers don't even get taken swiftly in a situation of increasing supply but contribute to the downward movement by building up this huge FRR wall. Then there have been incidents where after a huge chunk of orders the lowest available offer lies at 0.6% or something very high a 150k FRR offer gets posted at below 0.1% only to be immidiately slurped up. I feel the one using the FRR was screwed the most in that situation.

If you want to enable an automatic system that ensures sensible offers that get taken quickly you should orientate the FRR at the current offer book. For example let the system post the FRR just a pip below the current lowest offer of course adjusted to volume and offer size so that single small fake offers doesn't pull the rate down. This would ensure minimal influence of the FRR to the current order book and swap rate discovery.

In my personal opinion though no FRR is needed at all. The swap market is now mature enough and every player should finally understand that this is no savings account. Active management of one's own position should be encouraged not hindered.
The swap market is in a natural downtrend as BFX grows because increased visibility of the attractive conditions drags people's money onto BFX. The rate we should be looking at in the future is not 0.1% per day or even 0.05% but something along the lines of the prime interest rate only adjusted by the default risk of BFX, magnitudes lower than it is now.
No FRR used by lazy lenders is needed to fasten this downward spiral.
Logging into BFX 10 times a day for a minute to take a look at the book and post one's offers is not inhumane and should be the standard imho for the premium interest lenders are enjoying here.

Ending the FRR is a very bad idea.  Some people have small amounts lent out and don't want to micro-manage.  My guess is these suggestions will be dominated by people with larger amounts and/or people who like to micro-manage.

Correct. And this is absolutely how it should be. Someone who lends out $500 should have no real say on this because whether he gets 10% or 50% per year doesn't matter. It's pocket change either way while he contributes through lazy FRR lending to people with significant funds losing life changing amounts of money.

I am a liquidity provider and I won't delude myself. I want the rate as high as possible but I am reasonable and see how a rate of 1% per day is unwarranted and unhealthy (unless BFX has a huge default risk or we are in an epic bubble bullrun). As I laid out before the swap market is in a natural downtrend anyway and will be in the future for obvious reasons. All upward trends where merely achieved by reckless (and clever) manipulation.

We agree on the existence of the FRR but I think is becoming glaring obvious that Bitfinex does not; if mjr speaks for Bitfinex, they are married to the FRR.  It is not going away.  The best we will be able to do is convince them to adopt a better way of implementing it.

I think the reality is that Bitfinex is more concerned about the traders than the lenders.  We are not their primary customers, probably more of a necessary evil from their point of view.  This is pure supposition on my part but I would wager that if Bitfinex could provide the 20m-30m in swaps themselves they would drop the swap program immediately.

I would not agree that the swap market has matured for two reasons. One, the fact that the FRR exists, and two, the investors in the market.  Bitfinex has promoted that swaps are virtually risk free and attracted money that should be bound for an insured bank account, not used to fund highly speculative trading.  It would be interesting to see what would happen if an event occurred that caused the lenders to lose all of their principal.  Instead of dealing with a hundred people who new the risk and were prepared to accept it, they would probably be facing a class action suit to get the 'safe' money back.

What is currently bothering me the most right now is two fold, first that mjr seems to have abandoned this thread of discussion.  He came in cheerleading for the FRR, and when he met with differing opinions he disappeared.  That does not speak well for Bitfinex's professionalism.  Second, and more importantly, mjr does not seem to understand that the FRR, with over 10% of the market capitalization, is the market maker.  He seems to think that since the FRR is based on the average of the the non-FRR active swaps it reflects the current state of the market while not understanding that the non-FRR swaps have been priced to compete with the FRR.  This shows a complete lack of understanding of statistics and does not bode well for any intelligent changes to be made to the FRR.
 
It would be nice to get all the lenders to pull their money for a week and cause Bitfinex's margin trading seize up, but that is not going to happen.  We can only hope that someone at Bitfinex is tracking this discussion and is willing to make some reasonable changes.

[greyphilosophy]

There is enough swap, as when the contracts run out - it frees up a lot of swap (unless the lender refuses to renew).  The question is whether they'll try a short squeeze, or a swap squeeze. I'm thinking a swap squeeze is more profitable and we'll see 1% interest rates.

and bitfinex let this happen, and not answer for any mails

Is there any update about this?

They added more contracts and have kicked the can down the road.  I'm a little pissed that they didn't tell us in advance.  I closed a short position because I believed that there wouldn't be enough swap on the market for everyone to renew, and the price wasn't going down because someone put in a price floor.  Also recognizing this problem I jumped to the other side, buying contracts with the expectation that there would be a short squeeze.  To add contracts at the last minute means that I've now been screwed twice.

Adding more contracts doesn't help because there is still a chance that rational players will not offer any swap for the last day before contracts expire.  Add to this the interest those swap contracts are accumulating, which has to come from somewhere, and in the end there won't be enough TH1 in the market for everyone to close their positions.

Because I cannot predict what bitfinex will do or when, and their actions have serious consequences on the market, I'm now looking for the best way to withdraw.  I thought I was buying contracts in a market of 500, and after the fact it was changed to be a contract in a market of 600. </rant>

[QwertyCore]

You are saying the exact same thing as I am. The fact that there is only one variable rate means that everyone picks that one variable rate. So, it seems to me that the simplest way to fix that is to offer multiple variable rates, which you could do by using a delta from the FRR. Remember, the FRR is the average rate, so it is just a number like any other.

The absolute simplest way to fix it...

Another thought:

Build even more on BitBits idea: Fill the FRR to a predetermined amount.  Once that bucket is filled, close it and open a new one at FRR+0.05.  Fill that and then open a new one at FRR+0.10.  Continue ad nauseam. You will need a mechanism to reset the rate buckets.  You could probably just wait 24 hours after the the first bucket is exhausted and then adjust the higher tiers down to the FRR.

Limiting the size of the FRR is a bad idea.  The total number of swaps has increased by 5-10% in some weeks.  So allotting a fixed amount to the FRR won't work. Limiting the FRR to a percent of total swaps would also be tricky.  A limit would mess up people who use FRR auto-renew.

Ending the FRR is a very bad idea.  Some people have small amounts lent out and don't want to micro-manage.  My guess is these suggestions will be dominated by people with larger amounts and/or people who like to micro-manage.

What problems are there?
1. FRR slow to adjust - could shorten the period that the rate is based on.  Especially noticeable in the long downward trend of the FRR where I knew it was heading to 0.04% - but it took a long time.  However this is also the responsibility of people who had $4 million not lent out for not reducing their rate.  You don't want to shorten this period too much or the rate will vary too much, be prone to manipulation, and hurt borrowers.

2. Swap system is biased in favor of borrowers.  They can cancel loans and take better offers. Not sure how to fix this.  A possible limit to this is that lenders can move their money into another investment or go long themselves.

I suppose it depends on how you define limiting the FRR.  The total amount in the variable rate fund would not be limited, only the amount of offers at the lowest tier.  As more was added, it would create new tiers at a higher interest rate.  As the lower tiers are consumed, and after a set time period, the higher rate tiers would propagate down to the lowest FRR tier.  Calculating a percentage of the total swaps would not be difficult as it would be done at the time the tier is created.  The FRR auto-renew is not affected since there is no limit on the amount of money in the FRR; the auto-renew money might not be offered at the lowest rate but then that is the point.

As for ending the FRR being a bad idea, I would disagree and I think I have made my (belaboured) point in prior posts.  That being said, you are probably correct on who is participating in this discussion.

I don't think I can fully agree with the statement that the system is biased in favour of the borrowers.  The nature of margin trading dictates the basic rules.

What do you think of the other ideas I put forward?  Do any of them appeal to you?

nrd525, I made a mistake here, I thought your post was only referencing the last idea (variable rate buckets).  It's my error and I apologize.