[DRC] Update to Equity Tier Limits

dYdX Chain
1

Date Created - 7th March 2024

Simple Summary

We aim to adjust the equity tier limits to allow for an increased number of open orders for sub accounts within specific net collateral ranges. For net collaterals of $20-$100, we suggest changing the limit from 1 to 4 open orders, and for those between $100-$1000, from 5 to 8. This adjustment would apply to both short-term and long-term order types.

Abstract

The equity tier/net collateral limit plays a critical role in determining the number of open orders a sub account can hold simultaneously on the dYdX Chain.

​​Under the current framework:

  • Subaccounts with net collateral between $20-$100 are restricted to a single open order, and
  • Subaccounts with net collateral between $100-$1000 can have up to four open orders.

This proposal intends to modify these restrictions to improve trading flexibility and access.

Motivation and Rationale

The initial setting of equity tier limits was designed to reduce order book spam and manage the blockchain state’s size effectively. Although these goals have been met, the existing limits overly restrict the trading capabilities of sub accounts with lower net collaterals, especially those between $20 and $100. Such limitations hinder the ability to place simultaneous stop-loss and take-profit orders—a crucial risk management strategy.

By increasing the open order limits for net collaterals between $20 and $1000, we aim to:

  1. Improve the trading experience for individuals with smaller collateral amounts.
  2. Lower the barriers for entry for traders with minimal net collateral on the dYdX Chain.
  3. Provide these traders the opportunity to utilize various order types.

We see this proposal as a balanced approach to incrementally raise the equity tier limits, maintaining order book integrity while offering the necessary flexibility for traders to effectively engage with the dYdX Chain.

Specification

We propose the following updates to the equity_tier_limit_config parameter (indicating old versus new parameters):

“equity_tier_limit_config”: {

“short_term_order_equity_tiers”: [

{“limit”: 0, “usd_tnc_required”: “0”},

{“limit”: “1 to 4”, “usd_tnc_required”: “20000000”},

{“limit”: “5 to 8”, “usd_tnc_required”: “100000000”},

{“limit”: 10, “usd_tnc_required”: “1000000000”},

{“limit”: 100, “usd_tnc_required”: “10000000000”},

{“limit”: 1000, “usd_tnc_required”: “100000000000”}

],

“stateful_order_equity_tiers”: [

{“limit”: 0, “usd_tnc_required”: “0”},

{“limit”: “1 to 4”, “usd_tnc_required”: “20000000”},

{“limit”: “5 to 8”, “usd_tnc_required”: “100000000”},

{“limit”: 10, “usd_tnc_required”: “1000000000”},

{“limit”: 100, “usd_tnc_required”: “10000000000”},

{“limit”: 200, “usd_tnc_required”: “100000000000”}

]

}

Next Steps

Cipher Labs will not initiate this proposal on-chain. Following feedback and further iterations, we encourage a community member with sufficient unstaked DYDX to submit an on-chain proposal.

3 Likes
2

Just a quick question; if the initial rationale was to avoid orderbook spam and the amount of orders to be set simultaneously is set on 1.
But this is risky because you can’t do a take-profit and stop-loss at the same time.

Then why is the change not to 2 simultaneous orders, but to 4?
2 sounds more logical imo, since that stays close to the original intent, but it enables people to protect their funds.

2 Likes
3

We fully support this initiative, initial precautions were required and we still need to approach this carefully. But the current condition are indeed too restrictive for users. As rightfully pointed out by @LeonoorsCryptoman a basic trading strategy generally requires both a take profit limit and a stop loss order associated with the position. The current limitation for low collateral accounts (those between $20-$100) doesn’t even allow them to perform such basic risk management. As the community discusses the appropriate new level of these order restrictions, we suggest a minimum of 4 and therefore align perfectly with the current proposition. This value allows users to create at least two positions with the basic risk management we mentioned (the so called “OCO” order type or sometimes referred to “bracket” order comprising one limit and one stop order).

Moreover we need to factor in the huge growth we’ve seen recently in the number of new asset listing in the dYdX platform. This further increase the necessity to lift these barriers in order to allow users to open strategies on multiple assets. For those having a slightly higher collateral balance on their sub-acccounts ($100-$1000), the proposed limit raised to 8 seems reasonable, allowing them to open multiple strategies on different assets with more ease.

Following these principles, we will support this proposition both on and off-chain.

Thanks for reading,
pro-delegators-sign

2 Likes
5

Improving Trader Flexibility on dYdX: Supporting Increased Equity Tier Limits

I fully support CipherLabs’ proposal to adjust the equity tier limits. This change would bring much-needed flexibility to traders with smaller collateral amounts.

Key benefits:

  • Better risk management: More open orders allow for vital stop-loss and take-profit strategies.
  • Lower entry barrier: Welcoming for newcomers to the dYdX ecosystem.
  • Enhanced experience: Provides the tools for diverse trading strategies, even with less collateral.

This proposal strikes a balance between managing order book integrity and empowering traders. Let’s make our voices heard and encourage the community to move this initiative forward!

2 Likes
6

We support this proposal and have sufficient unstaked DYDX to meet the deposit, so will spearhead this change starting with testnet now it’s back up and running.

1 Like