IIP-83: Wintermute Market Making Proposal

Status: Proposed Author(s): @fallow8 and @wishful_cynic Discussion to: https://gov.indexcoop.com/t/iip-83-wintermute-market-making-proposal/2575 Created: 5th September 2021 Quorum: 104,196 INDEX [2,083,937*0.05]

Simple Summary

Provide a loan of INDEX to be returned or repaid under the terms below within a year to Wintermute in exchange for commitment of Wintermute’s capital and resources towards market-making and tier 1 CEX listings for Index Coop products‌.

Abstract

This proposal is published for presenting the terms of $INDEX market-making services to the Index Coop 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 in 1 year:

• The the full loan amount in INDEX; or
• $5 million (USDC/DAI/ETH or mutually agreed upon currency) if any Index product or INDEX itself is listed on a Tier 1 CeFi exchange (defined below) with the aid of Wintermute’s efforts; or
• $7.5 million (USDC/DAI/ETH or mutually agreed upon currency)

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 Million. In addition, Wintermute will and continue market-making on KuCoin and across DeFi aggregators.

Motivation

Index Coop will experience exponential growth through Tier 1 CEX listings and a relationship with a market-maker of Wintermute’s caliber will ensure the Coop’s success in listing and supporting the token. See below for more from Wintermute on their motivation and background from prior discussion posts below:

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, Blockchain.com 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

Should it be determined that Wintermute is not expending efforts towards the above commitments, Index Coop may recall the loan.

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.

This proposal has been discussed in the forums and on a community call and will move to IIP absent significant feedback.

Specification

Send 100,000 INDEX to a designated Wintermute address to secure the terms above and held/returned per this proposal.

Rationale

This proposal incentivizes one of the largest market-makers in our industry to work on behalf of our protocol. All other market-making proposals the BD and IB teams have reviewed have requested a significant inventory loan of DPI/MVI or whatever products we're market-making PLUS either a fee structure or option incentive. Wintermute will not require product inventory loans and has committed to using its balance sheet on behalf of the Coop. This step will have an exponential impact on the Coop and we look forward to working with Wintermute to make our products widely available off-chain.‌

Copyright

Copyright and related rights waived via CC0.