βœ… [RFC] Pre-Approve MTA for Market Making

Summary

After $mUSD being listed on Coinbase last month, it has become apparent that any major CEX listing of mStable assets need also to be accompanied by a market making services to ensure liquidity for that asset on launch day. This is a requirement from the exchanges as a pre-condition to listing on their platforms and is non-negotiable.

With this in mind, I suggest to earmark the use of up to 2,000,000 MTA from the TreasuryDAO to serve as a loan to a trusted Market Maker should MTA ever get listed on a major centralised exchange and the need arise. The term of this loan would be for a window of service during the first few months of bootstrapping MTA liquidity for that specific CEX.

Abstract

When mUSD got listed earlier last month on Coinbase Pro, there was a request by the exchange to provide sufficient liquidity on the pair. This was provided via a Market Maker on very short notice.

In order to avoid any similar headaches in the future, I suggest to earmark up to 2,000,000 MTA from the TreasuryDAO to loan out to trusted Market Makers over a previously agreed upon of time in order to bootstrap the MTA market on the to-be exchange, whichever one that may end up being.

A major exchange classifies as a Top 10 exchange in the ecosystem, like Binance, Coinbase, Kucoin, and so on.

A major market maker classifies as a Top 10 trusted party in the ecosystem, like Wintermute Trading, Kairon Labs, Alameda Research, GSR, and so on.

Unfortunately, centralised exchanges are not integrated enough into the DeFi stack to make options like Tokemak a viable alternative for liquidity.

If approved, these funds would be sent to the funding subDAO, so that they can be deployed quickly should the need arise.

Motivation

Historically, when a new market is opened on a major CEX, a certain amount of liquidity needs to be provided by professional market makers in the ecosystem. Since we do not know the exact time and date if or when MTA will get listed, we should prepare ahead of time, as failure to provide a sufficiently liquid market could result in a delisting from the exchange.

Pros

  • Easy onboarding flow to the CEX once MTA gets listed
  • Deep liquidity on the exchange, which will drive bigger trades
  • Ensuring that the relationship between the CEX and the mStable core contributor team starts off on the right foot
  • Improved probability of major CEX listing with these funds earmarked

Cons

  • Lose the ability to temporarily utilize 2m MTA in the treasury, which will be eventually custodied and maintained by a centralized party
  • Custodian risk with the market maker

Next Steps

It is suggested that the community comment on this RFC in the coming days, and bearing no significant opposition or change in ideation, we would move ahead with this RFC in the coming weeks and create a formal draft proposal on Github to be used for review.

Meta Governors are encouraged to provide as much feedback as possible until then, so we can create the best possible outcome for mStable and its users.

2 Likes

I am supportive of this proposal. It would be great to back up the mUSD listing with a listing of MTA on a major exchange and having this amount pre-approved for market making would help to ensure that we don’t miss an opportunity. Of course proper due diligence in selecting a trusted market maker would be critical. Perhaps we should also be looking to create relationship in advance to avoid rushed decisions there.

1 Like

Thanks, @mZeroNine for this initiative
I fully support this.

Market Making is a prerequisite for any listing on a major centralized exchange and it requires deep liquidity provisions.
As a key priority for mStable in the near future is to list MTA is, sparing some in advance is a smart and necessary move

1 Like

Makes good sense to anticipate this! We remembered how this listing can come about. Positioning the Treasury ready to act is a very good proactive strategy.

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If no more objections come on this RFC, I’ll be posting the TDP for this next week!

Thanks everyone for contributing, and looking forward to seeing this move forward!

1 Like