LPs take impermanent loss risk and and are compensated for it in the form of fees.
For relatively stable pairs, there is less IL risk so DeFi protocols are generally able to attract liquidity with a lower promised fee. We clearly see this in the market, as leading stableswap protocols on Ethereum and Solana charge 4 bps (Curve, Saber).
Serum should explicitly lower taker fees and maker rebates on a list of specific pairs chosen by governance. This list could be altered at a later time by future governance action.
To be more concrete, we think the following would be reasonable:
- Taker fees of 4 bps;
- For non-MSRM holders, maker fees of -2.5 bps (i.e. rebates of 2.5 bps);
- For MSRM holders, maker fees of -3 bps (i.e. rebates of 3 bps) (We don’t feel strongly about differentiating MSRM but suggest it as a starting point);
- for any of the following pairs:
** any pair involving 2 of USDT, USDC, PAI, UST (wormhole), USDC (wormhole), USDT (wormhole), DAI (wormhole), BUSD (wormhole), HUSD (wormhole), BUSD (wormhole); or
**any pair involving 2 of SOL, mSOL, prtSOL, stSOL, SOCN.
Support (lets save MSRM utility and future vision for another day )
Thinking about it some more, we can reduce this further in an effort to reduce the min possible quoted spread.
Our new proposal:
- taker fees of 2.5 bps
- maker fees of 0 bps
- for the same pairs mentioned previously
Makers adjust their quote to price in fees/rebates. Previously, even under the lowest fee regime of 10/-5, a locked market by the maker will be 10 bps wide to the maker and 20 bps wide to the taker. That wide market is a significant friction which inhibits trading.
Under our new proposal, a locked market would be 5 bps wide to the taker.
Also, we removed the MSRM distinction.
Raydium is currently developing it’s stable swap program and from an AMM perspective, the first proposal of -2.5 and 4bps makes more sense for composing with Serum. Serum already has tight spreads on stable pairs and 4bps would make it competitive with other protocols such as Curve, Mercurial and Saber.
With a 0 bps maker, it would be hard for an AMM to post tight spreads on Serum and still be able to generate fees for its LPs. It would solely be relying on the spread of the token pair which would likely be below 1bps. This would make it largely unprofitable to run a stable swap on Serum and discourage other projects from trying to compose with the stableswap pools.
We feel that having multiple protocols composing with Serum’s stable pairs would bring more value in the long run and is worth giving up some fees for.
I created a forum post to discuss Serum fee reduction that includes stable fees discussed in this thread, if you guys want to take a look - Serum Fee Reduction Proposal