Status: Proposed Author: Matthew Graham (@Matthew_Graham) Created: 13th August 2021 Quroum: 98955.5 [0.05*1,979,110] Discussion-to: https://gov.indexcoop.com/t/iip-72-redirect-fli-revenue-to-operations-account/2368

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.