Proposal: Market Making Proposal from Wintermute Trading

Proposal: Market Making Proposal from Wintermute Trading


This proposal is published for presenting the terms of $INDEX market-making services to the Indexcoop community and approving it:

  • Authorize Wintermute Trading as an official $INDEX market-maker
  • Lend 1% of $INDEX supply (100,000 $INDEX) for market-making purposes as a loan to Wintermute Trading. Wintermute Trading will have to return either the full loan amount or 5 million USDC in 1 year
  • In return, Wintermute will commit to maintain inventory in Indices upon them being listed on any Tier 1 Cefi exchange. The amount invested will be 10% of AuM up to a total of $20 mln. In addition, Wintermute will and continue market-making on KuCoin and across DeFi aggregators.

Wintermute basic background

Wintermute was founded in July 2017 by three Optiver veterans. Evgeny Gaevoy, founder and CEO, was previously head of ETFs (screen and OTC) at Optiver Europe, one of the largest ETF market making desks.

Wintermute’s trading volume in 2H 2020 surpassed $70B and their average daily trading volumes in 2021 are over $2B

Wintermute is backed by Lightspeed Venture Partners, Pantera, Ventures and others.

Wintermute Trading is registered with FCA for our OTC business.

Wintermute Index Coop specific background

Wintermute believes index products will be one of the key themes in 2021 and as a result is looking to back several teams in the space with an ultimate goal of:

  • Listing the index products on key cefi exchanges and facilitating liquid markets on these products and their derivatives (starting with perpetuals, following with options)
  • Combined total AuM of index products exceeding $25B by end of 2021

Wintermute believes the key issue with these products not being adopted outside of defi is lack of market making support as market makers and exchanges are not looking to support/list them because of low AuM, while the AuM stays low because there is not enough adoption/interest outside of defi. Wintermute wants to lead that adoption by committing a significant part of it’s resources and at the same time getting exposure to leading teams by becoming the official MM in protocol tokens and direct investment. Wintermute expects to be active in governance matters.

Wintermute is already a supporter of the Coop:

  • Makes markets for DPI on KuCoin and across DeFi aggregators
  • Go-to provider for OTC institutional flow in coordination with IC Institutional Business team
  • Invested directly in the Coop in the recent OTC sale

Specifically for Indexcoop community Wintermute commits to:

  • Provide liquid markets across all tier 1 cefi exchanges* (and a handful of 2nd tier as well). We already make markets across aggregators on defi (1inch, paraswap, matcha etc) and on KuCoin
  • Proactively support listing of $INDEX on key western exchanges in coordination with BD Index Coop members
  • Support new Index Coop product launches towards cefi and defi listings
  • In particular, once Indices are launched on tier 1 exchange*, Wintermute commits to hold 10% of the AuM for market making purposes with a minimum of $0.5 mln per INDEX, up to $20 mln in total for all listed Indices
  • Wintermute also commits to be the go-to Market Maker for any OTC institutional flow, providing competitive prices for tickets starting from 100K USD and beyond

*Tier 1 comprising of: Binance, Huobi, OKEX, Coinbase, Kraken and Gemini

Ask :

We would like to request the Index Coop community to pass a proposal to approve the transfer of up to 1% of the total token supply of $INDEX for Market Making services of $INDEX on key centralized exchanges.

We propose to Index Coop Community appointing a third party agent (Wintermute Trading) to act as the Index Coop Community Agent to market-make $INDEX across cefi, defi and OTC

To facilitate the work of the Community Agent on the community’s behalf, we propose to authorize operational actions required to effectuate the market making, including release of up to 100K $INDEX to the Community Agent from the Indexcoop Token Supply for liquidity provisioning.

After discussion and finalization of terms, a forum vote will be proposed first to check sentiment and then there will be an IIP given the amount involved.


Thanks @wishful_cynic! First, I’d like to say that I’m broadly in favor of this proposal and appreciate all of Wintermute’s support for the Coop to date.

I expect a significant amount of feedback from the community and think people should sound off on any concerns they have here. Evgeny has also offered to do a community call on the topic if we feel it’s necessary, but I’d wait until we’ve had some questions and answers here. I’m looking forward to a productive conversation here, and also welcome anyone reaching out to me on Discord if they have questions or want to just generally talk about why I think this would be a boon for the Coop.


Looking forward! Governance is fun:)


Just wanted to voice my support for this proposal. Being heavily involved with BD partnerships and integrations of our products we have been struggling to build liquidity to unlock rewards for our LP tokens and products. Having wintermute support us will drive value both ways as they will have first access to the reward programs that we negoiciate with other platforms, while we have the benefit of having sufficient liquidity for our products to trade.


So it sounds like to me, based off this post and other conversations I have heard on the topic, that having a dedicated MM is almost a pre-requisite for Tier 1 exchanges looking to list? Is that the case? I am assuming I am not alone in the fact that I am pretty unaware of what that process actually looks like, and the requirements involved. How does having a dedicated MM such as Wintermute speed up that process or increase our chances at Tier 1 listings? I know you touched on it in the quote above, but looking to get in the weeds a bit more.

The downside risk for the Coop appears to be that $INDEX goes >2.5x over the next year and we miss out on whatever that difference is compared to the $5mil USDC. So I am just trying to gauge all the potential positives and their likelihoods of happening from this proposal to weight against that cost.

Looking forward to leveling-up on all things market making and exchanges through this convo!

@wishful_cynic @fallow8


I actually think this is a very small downside risk and absolutely worth taking.

Index Cooperative is a startup. In my view, we should be aggressively investing in ways to grow liquidity (beyond liquidity mining) to accelerate adoption of all of our products.

Having a dedicated market maker is an excellent way to do just that.

I don’t think that I can fairly evaluate the details of this proposal (i.e. are the numbers exactly right?), but I am hugely in favor of the general idea of the proposal (i.e. have Wintermute as a dedicated MM).


Many reasons to go ahead, but have a couple of questions:

  • Whats are the black swan event /scenarios ? Can we mitigate ?
  • Are there any other impacts to other areas ? Treasury etc. ? Are all the other parts of the org bought in ?
1 Like

Listing process on the centralized exchanges (I’m talking tier1) is not super transparent. Having a MM is generally what they would look at before opening the orderbooks, but we’ve seen listings without a market maker happening in the past. What’s more important, I think, is once the index tokens (i.e. DPI) are listed, tier 1 exchanges would definitely need a MM and that’s where we are prepared to step in


Thanks for the well written proposal!

I think we need to be clear on exactly what services are changing hands here. Wintermute has offered to provide liquidity for our products if they are listed on a tier one exchange within the next year.

In exchange, they want us to underwrite a 100,000 INDEX call option with a strike price of $50 and an expiration in one year.

I am just a humble engineer, so please someone check my numbers here, but plugging in some reasonable values for volatility and interest rates, we can use the Black-Scholes model to try and come up with an estimated value of this option. This value appears to be around $700,000 (please someone double check as I am not a finance guy). Additionally, unlike a traditional call option, Wintermute will have access to this ~$3M loan, which has additional value in of itself.

The questions we have to answer now are:
What is the value of Wintermute market making for us?
What are the odds an Index Coop product makes it on to a tier 1 exchange in the next year (my guess is pretty low)?
Are these services worth the ~$700,000 value of this call option?


Really like that mgnr post is continuing to make waves:)

To be perfectly honest, 700K is probably on the low side, because alts arguably have a much higher vol than ETH

That being said, let me share our thinking around this structure. if IndexCoop would approach us and ask to pay us a 100K bucks for theoretical provision of liquidity in index products, we would have said no, because it would not be enough to dedicate enough focus on our side. Could we do it for 500K? Maybe, but then again, it would be more of a chore to justify getting paid. Why I like this particular option structure is because it gives us an upside to the project way beyond the theoretical option value. Our price target for INDEX if it is successful is not 50 or 75, but more like high 3 digit number! That’s why we bought INDEX before and then bought some more in the recent OTC round. We are obviously standing to make way more than 700K in this case:)

But this is obviously our motivation. As in every negotiation it is possible that it is simply impossible to find a price in the middle, because it is too low for one party and too high for another. IndexCoop needs to decide on whether it is a good deal for the project etc, but I would invite everyone to not necessarily think in terms of transaction, but also take into account the general alignment of interests. The proposed structure aligns our interests really well in my opinion, giving a strong incentive for Wintermute to act beyond the proposed KPIs, thus potentially bringing in more value than agreed in the original proposal


Hi, @wishful_cynic welcome to the co-op. Thanks to you and @fallow8 for the proposal.

Agree with @jdcook and @Thomas_Hepner.

Whilst the opportunity to partner with Wintermute is no doubt exciting and potentially highly beneficial. I believe we should carefully go over this proposal as a community, fully understand the terms, implications and collectively make sure we are comfortable should we decide to proceed.

Just to break this down for a second. Index co-op would essentially sell Wintermute a (covered) put option with an $50 expiry price. For anyone unfamiliar with options this basically means that In 1 year’s time if the Index price is above $50 then Wintermute will keep the Index tokens and return USDC instead. Therefore, for example, if the spot price on the day is $60 then the co-op will lose $1,000,000 ($10 x 100,000) in opportunity cost (not actual loss).

Put simply, for every $1 the spot price is above $50 the IC coop treasury will lose $100,000 of immediate spending power.

If the price is lower than $50 then Wintermute would return the tokens. All works completed by them over the time period would essentially be free of charge.

Quick disclaimer I am not an options expert but I feel it is worth highlighting to the community here that the traditional nature of selling options is usually considered risky. As the upward price of Index is theoretically unlimited, so here is the risk of our opportunity cost at the end of the term. Index @$100 = $5m loss. $200 = $15m. These are facts NOT forecasts.

A brief history of Index price

(spreadsheet here)

At first glance, $50 looks pretty good compared to the above being above spot, 50,100 and 200 moving averages, as well as our recent VC raise (~$24.26) price.

However, I would like to highlight the all-time high price of $67 on May 12th, 2021. It could be argued that Index was overpriced during this period. Or we are underpriced now.

Ultimately this forces us to consider what the price of Index might be in 12 months’ time. This is practically impossible to do given the nature of the market and our tokens’ future liquidity, but here is some food for thought for the community before entering into such a commitment.

User base

Current user base = ~22k
@ start of 2021 = ~4.8k
Growth rate YTD = ~460%

Potential user base in 12 months time (simple extrapolation) = ~52k

Take away: In 12 months’ time based just off of our current range of products, we could see a 2-3x in user numbers from today.


Cumulative revenue = ~$1m
@ start of 2021 = ~$34k
Growth rate YTD = ~3,000%

Potential cumulative revenue in 12 months time (simple extrapolation) = $2.68m


As the market matures we are having to spend less to incentivize user adoption of our products.

Question to the community

  • Are we happy with the $50 implied sale price?

Question to Wintermute team

  • What room do we have to negotiate on terms?

Question to both parties

  • Is this the best way to do business? Would a more simple/conventional structure suit both parties? Example: Index pays Wintermute a retainer + pre-agreed rewards based on pre-agreed targets (Listing’s on Tier 1 exchanges = x$)

Pricing is interesting :grinning_face_with_smiling_eyes:

Without further commenting on the pricing, I like this initiative a lot.

Market making is definitely useful for users & Indexcoop and there is a massive opportunity for any market maker to arbitrage prices between Set prices, and index prices on CEXs & DEXs.

As stated above, liquidity & liquid markets on CEXs are a must today. I do not see much value in working on tier 2 exchange listings as we got DEXs but as Coop I’d do anything to get DPI and other products listed on Coinbase, Binance, & Huobi to reach more crypto investors. Therefore, a partnership with a marketmaker such as Wintermute is a must.


  • Have you asked other market makers about quotes?
  • Is a tier-1 CEX cooperation/listing of products in the works (next 3 months)?
  • Are you guys interested in getting additional quotes from market makers?

If you could share existing progress with CEXs (dm open) or if you’re interested in quotes from other market makers, I’m happy to support you and reach out myself.

Don’t want to promise anything though. Also, I don’t want to reach out to parties you’re already in contact with or jeopardize this deal :slight_smile:


I have experience of increasing liquidity of a projects tokens as well as trading derivative product in CEFI and DEFI. I have implemented Market Making and Liquidity Programs from a Project Perspective. There are a number of ways of pricing market making but ultimately there is no free lunch. Couple of points

  • List item The options are extremely valuable on High Vol Tokens. Typically they price off Implied BTC Vol which will be alot lower.

  • List item Plenty of negotiation on Strikes. Although say a 2x Strike looks high for INDEX, the reality is for an early stage project it is a low strike.

  • List item I have used ATM Call Options for a mature project and they worked well. Key is the size of the option notional though. I have also used OTM Call Options for running a treasury which again can work well. However early project like INDEX needs to be really careful on Strikes.

  • List item 1% (100k) of INDEX token supply is high. Would have though more like 0.5%. Your liquidity pool on DEXs is small and I would be incentivising commuity on these aswell.

Lastly I am a token holder so happy to comment further on this issue.


Evgeny hit your other questions, but I did want to speak to this one. We’re actively working towards T1 exchange listings in IB and I feel confident in our ability to land one within a year. But I want to be clear that establishing a relationship with Wintermute will increase those odds and shorten that timeline. We experienced this directly in Bitcoin Miami where WM introduced us to contacts in listings for various exchanges. It’s clear they’re a valued node in the ecosystem by the T1 exchanges.

I think we should be. We did have another conversation with a market maker for a similar structure who asked for a discount to the current market price. The argument that it’s “unfair” to me would be based on the ATH of $67, but I think everyone involved is well aware of the local top + low liquidity of INDEX at the time.

This is a fair question. I think it boils down to @wishful_cynic’s answer above. An option structure incentivizes Wintermute to help us out along several fronts (new chain liqiuidity, new products) beyond T1 listings for DPI and provides attractive upside without settling on a cash figure now. The downside for the Coop is if we achieve triple digit price levels without WM’s support. If leaders in the Coop see that happening, then I think we shouldn’t press forward. But I’ve consistently heard others state that T1 Exchange Listings would be massive for the Coop and I happen to personally believe that winning that race for on-chain indices will be extremely important. It’s that aspect, for me, that prompts me to advocate for this deal. I think we can accept a “good enough” structure if it will drive a blowout result for the Coop. But I’m open to hearing improvement suggestions from others.

@wishful_cynic - The chorus of requests for a community call on this topic has grown. I’ll reach out to you to start scheduling.


Would Wintermute have the right to vote with these tokens before the expiration date? 100k is a significant position, added to their initial investment it would give them a lot of voting power without having to pay before 1 year. If the intent is not to use them for voting, a provision should be included in the contract.

@fallow8 @wishful_cynic


My questions below are around what Wintermute is committing to -

1: How exactly does Wintermute intend to commit to being “the go-to market maker for any OTC institutional flow”?

2: What metrics is Wintermute committing to fulfill?
a) what percentage of time are they committing to quote in a given month?
b) what spread can they commit to when quoting?
c) are they agreed to provide a certain amount of liquidity in the market with that spread?
d) do they provide some sort of retrospective documentation to clients (i.e. us) to prove their performance?
e) how do we plan to hold them accountable and compare how they are doing as a market maker?

3: Which pairs are they committing to, and on which markets? Is it just Tier 1 and handful of Tier 2, if we are on them?

  1. If yes to #3, what happens if we do not get listed on a tier 1 exchange? Is this proposal not followed through on then and just evaporates?

  2. Do they have an expectation of what their OTC flow will be of DPI and Index products?

  3. Given that each exchange is silo’ed, are they planning to support/quote some exchanges better than others and to what extent?

  4. What is the their timeframe for deploying across markets (if/once approved)?

  5. What happens at the end of the 1 year timeframe?

  6. I don’t understand this - can I have some more detail on this?
    -In particular, once Indices are launched on tier 1 exchange*, Wintermute commits to hold 10% of the AuM for market making purposes with a minimum of $0.5 mln per INDEX, up to $20 mln in total for all listed Indices


This is a very good question. From our discussion with other projects we are market makers for, it’s generally not preferred option for us to be able to vote with MM tokens. I’m happy with whatever community/management decides