IIP-72 Redirect FLI Revenue to Operations Account

status: Proposal
author: Matthew Graham (@Matthew_Graham)
created: 13th August 2021

Simple Summary

This proposal seeks to redirect the revenue streams generated by the FLI product offering from the Treasury to the Operations Account.

Operations Account: 0xFafd604d1CC8b6B3B6CC859cF80Fd902972371C1
Treasury Account: 0x9467cfADC9DE245010dF95Ec6a585A506A8ad5FC

Abstract

Currently, the FLI series revenue is deposited into the Index Coop Treasury. The TWG recommends the FLI product revenue is routed directly to the Operations Account when the fees are transferred from the vault to Index Coop.

From the Operations Account, the TWG intends to periodically sell all the FLI revenue to ETH. The swap transactions are to be performed soon after being received within the Operations Account.

Motivation

After modeling the past performance and much discussion, the Treasury recommends a more risk averse strategy be adapted with regards to holding leveraged products within the Treasury. The FLI products are designed for leverage trading and are priced accordingly.

The charts below compare the Book Value of the FLI products (Orange Line) the Portfolio Value (Blue area) and the Unrealised Gain/Loss (Grey Line). A grey line beneath zero indicates an unrealised loss relative to selling the FLI products at time of receipt into the Treasury. The key takeaway is downwards and sideway market conditions creates unfavourable conditions for holding FLI and as the treasury is not intended to be an active short term trader, the prudent approach here is to swap the FLI products for ETH.

Given the current developer workload, the TWG opts to perform the swap transactions manually and periodically soon after the Operations Account receives the fee income. We anticipate only a handful of transactions per month as the fee collector seldomly calls and this gives the TWG the ability to perform transactions in line with any pending financial reporting cycle. In the future, we can explore automated functionality such that the treasury just receives ETH instead of the various FLI products. For now, the manual lift to perform these transactions is low and TWG also benefits from building a track record of managing the communities capital.

Specification

The FLI products are amended such that the fees are deposited directly into the Operations Account. The FLI revenue is then to be exchanged for ETH by the TWG soon after being received.

Operations Account: 0xFafd604d1CC8b6B3B6CC859cF80Fd902972371C1

Voting

FOR:

DO authorize changing the FLI product enabling fee revenue to be deposited directly into the Operations Account. FLI products are to then be exchanged for ETH by the TWG.

AGAINST:

DO NOT change the existing arrangement and allow FLI products to accumulate within the Treasury.

Copyright

Copyright and related rights waived via CC0.

10 Likes

Hi @gregdocter, @Pepperoni_Joe,

May I please have an IIP Number assigned, a discord discussion channel created and a Snapshot vote scheduled for Monday 16th August 2021.

Thank you in advance.

4 Likes

I’m fully in support of this initiative. We should try to avoid holding leveraged products long term and delegating the transaction to the TWG allows others to take on responsibility and frees up Set personnel from Routine tasks.

8 Likes

Thanks for drafting this IIP @Matthew_Graham.

Before I put this to IIP can I just confirm you have signed this off with the FLI and Product teams and can confirm they are happy with this change cc @afromac, @allan.g and @puniaviision.

3 Likes

Thanks Joe. The FLI team are fully in support of this proposal.

Tagging @ncitron and @dylan for a comment on the technicals of redirecting to Operations account please.

4 Likes

@Matthew_Graham confirming I am queuing this up for IIP to go live 6pm UTC 16th August.

2 Likes

Please do good sir :slight_smile:

Can we just hold off till I get that comment back from the Engineering team please. FLI team is in support of using the income this way, but just to double check this has no other implications on permissions outside FLI income etc.

Apologies, I edited my post above to add that detail and can see from the language I used it was unclear that is what I meant.

2 Likes

This will require some smart contract work to get off the ground. Currently the StreamingFeeSplitExtension only allows the fees to be directed to the operator of the manager contract. Rewriting the extension to allow the operator to set an arbitrary recipient should not be particularly difficult, but will still be a non-trivial change that will require code review, new deployments, and multi-sig transactions to remove the old extension and add the new one.

Tagging @dylan to comment on how we would fit this into our timeline

6 Likes

Thanks @ncitron. Based on that info, I would say please schedule the vote @Pepperoni_Joe, @Matthew_Graham.

3 Likes

Thanks @Matthew_Graham, @afromac - we have scheduled this IIP for Monday 23rd of August.

snapshot vote here

cc: @mel.eth

3 Likes

This IIP has successfully passed snapshot with 100% FOR. :white_check_mark:

5 Likes

Hi @dylan @ncitron

Can we please learn when the FLI revenue is to be redirect to the Operations Account.

2 Likes

Hi @dylan @ncitron

Just noting the IIP passed around about a month ago. If it can not be implement promptly, can EWG advise a timeline as to when this will be completed?

It would be great to have this change implemented before calling the Fee Manager contracts for months end reporting.

2 Likes

Unfortunately there is a blocker here that requires us to run through some more serious manager upgrades before we can implement IIP-72. I will see if their is a way to get around this problem or at the least get a timeline for when it can happen soon.

2 Likes

FYI this work has been flagged for revisiting assumptions & potential scoping in the upcoming sprint.

2 Likes

You are a legend @dylan and thank you :slight_smile:

2 Likes

Hi @dylan,

Can we please get a progress on implementing IIP-72 ?

Thank you in advance.

1 Like

The execution doc for IIP-72 has been completed. We need to do a couple contract deployments and then can execute the multisig transactions.

Sorry for the delays, there’s definitely been some juggling these past few weeks. I’d like to get this completed by next sprint (Wed. Dec 1st).

3 Likes