I should add that I am a member of Stakecito - a dYdX Validator and that we will in future set up an official account for these purposes.
Simple Summary
This proposal seeks to create a new liquidity tier on dYdX, specifically designed for markets introduced through the Instant Market Listings feature. The objective is to standardize risk parameters and margin requirements for these markets, enhancing trading flexibility and aligning leverage options with other tiers.
Abstract
The Instant Market Listings feature allows users to list and trade perpetual futures on virtually any asset instantly, without the need for governance approvals or third-party permissions. Currently, markets listed through this feature are categorized under the Isolated liquidity tier, which imposes conservative margin requirements and limits leverage to 2x.
We propose to introduce a new liquidity tier that permits up to 5x leverage for these markets. This tier would utilize the same margin fractions as the Long-Tail tier but maintain the open interest bounds from the Isolated tier.
Motivation/Rationale
The Instant Market Listings feature has empowered users to swiftly respond to market trends by listing new assets. However, the default classification of these markets under the Isolated tier restricts leverage to 2x, potentially limiting trading activity and liquidity. By introducing a new liquidity tier that allows up to 5x leverage, we aim to:
- Enhance Trading Opportunities: Providing higher leverage aligns these markets with other tiers, offering traders more flexibility and potential for strategic positioning.
- Standardize Risk Parameters: Applying consistent risk parameters across similar leverage tiers ensures a uniform trading experience and simplifies risk assessment.
- Maintain Risk Management: Retaining the OIMF of the current ‘Isolated’ tier ensures that while leverage is increased, the platform’s risk exposure remains controlled.
Specification
The proposed new liquidity tier and its parameters will be defined as follows:
“name”: “IML 5x”,
“initial_margin_ppm”: 200000,
“maintenance_fraction_ppm”: 500000,
“impact_notional”: 1000000000,
“open_interest_lower_cap”: 500000000000,
“open_interest_upper_cap”: 1000000000000
These parameters align with the existing 5x leverage tier, ensuring consistency in risk management while offering enhanced leverage for instant-listed markets.
Next Steps
We encourage the dYdX community to review the proposal and provide feedback. If there is no objection, we will proceed with submitting the proposal on Wednesday, March 26, 2025.