This proposal presents the community with an opportunity to set aside capital to be used for buying back INDEX on-market when both Finance Nest and Wise Owls (Index council) believe the price is significantly undervalued. The INDEX purchased on the market can then be sold at a later date or used to fund operations. Finance Nest has the ability to implement various trading strategies in order to create a positive carry trade.
The initial budget request, $700K, will be deployed upon receiving approval. To accommodate this reallocation of capital, $700K will be transferred from the Treasury to the Operations Account ensuring the Operations Account is well funded.
Treasury Account: ‘0x9467cfADC9DE245010dF95Ec6a585A506A8ad5FC’
Ethereum Operations Account: ‘0xFafd604d1CC8b6B3B6CC859cF80Fd902972371C1’
When the value of the INDEX is deemed undervalued, the community has an allocated budget to support buying INDEX on market. Other protocols like Yearn have implemented a buy-back and build model, and this proposal services the same buy-back values, with a point of difference that INDEX will be reinvested, either sold or used to fund operations.
Index Coop is to implement a positive carry trade philosophy, wherever possible. The intention is to deploy strategies that are self-servicing. Finance Nest will be responsible for designing and maintaining the free carry trade strategy which will then be executed from the Operations Account. A free carry trade in this instance indicates that Index Coop is making a positive ROI on the buy-back strategy independent of INDEX price fluctuations.
Finance Nest proposes an initial $700K budget be deployed towards implementing a buy-back and invest strategy. In time, Index Coop could redirect a portion of revenue to this concept. The intention is to start small and monitor progress.
The Index coop currently does not have the functionality to be able to buy back its governance token on-market. The ability to purchase, and sell, the INDEX token is something that is essential to maintaining good protocol ownership. This proposal details the ability for Finance Nest to request approval from the Wise Owls to transact in INDEX on market beyond the normal operational WG funding needs.
On-market buy-backs are an effective way to reinvest in the communities future success by bolstering our INDEX. This proposal creates the ability to purchase INDEX when the price is perceived to be undervalued and either sell INDEX at a later date or reinvest it back into the community. This will enable the Index community to retain ownership through utilizing current circulating supply via repurchasing and reissuance of INDEX without increasing circulating supply.
This proposal enables Index Coop by the Finance Nest to manage a portion of the community’s capital like a reserve and capitalize on broad market moves. On-market buying of the INDEX token sends a powerful signal to the market that the community feels the INDEX token is undervalued. For Index Coop to realize the goal of becoming a sustainably funded DAO, the community’s assets must be utilized to benefit the community and this includes the ability to transact in INDEX.
The Finance Nest will have the ability to implement free carry trade strategies that benefit the community. This involves some financial engineering which the Finance Nest is more capable of implementing.
An INDEX buyback will also have the effect of improving the community’s financial metrics. A number of key performance measures that utilize the circulating supply of INDEX as a denominator will improve such as the earnings per circulating supply token.
The Finance Nest will provide periodic reporting through the monthly Operations Account update and community calls.
- $700K of USDC held within the Operations Account for supporting the INDEX buyback program
- On-chain transactions are to be executed from the various Operations Accounts
- Decision-making process - Finance Nest recommends an INDEX transaction to WO and WO approve the transaction prior to on-chain execution
- Finance Nest designs, manages, and reports all trading strategies
- Reporting is to be provided via the Operations Account monthly updates provided by Finance Nest
- INDEX can be purchased and sold on-market
- Profits are reinvested back into the buyback program over time
Notable considerations. When a free carry trade strategy is mentioned, this could include the use of debt. An example is when lending rates for one stable coin exceed the borrowing rates of another stable coin. Thus enabling a deposit and borrow strategy which nets a positive return.
DO approve the using $700k USDC within the Operations Account for the purpose of supporting the INDEX buyback and reinvest program as detailed above.
DO NOT proceed with the above proposal.
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