Option RFQ example

Prop desks, Hedge funds can use clearing/ settlement infra to create custom options and trade them OTC (Initially invite only feature)

Creating and Price Discovery Process

Closed Bid Auction

  • Protocol team whitelists primitive options products (set of assets and expiries (ETH, Calls, 28 Jan expiry, USDC collateral, cash settled)

  • Users can decide specific configurations and create an option of their choice. Listing can be done publically or privately in case they want to sell it at a predetermined price to a buyer.

  • All custom options and spreads are full collateralised assuming max seller loss.

  • Users (LPs in this case), put up collateral and mint eTokens (ERC-20 / SPL equivalent of options). Initial minting phase is open for 5 days (~1 week)

  • Once minting phase closes, a Blind Dutch/ Vickery Auction begins and option buyers quote a price (hence, option buyers are Market Makers in this case, and LPs are price takers)

  • Auction lasts till complete Open Interest is bought off. If the auction isn’t filled within a day, if > 50% of the OI is filled, remaining token are burnt (which LP’s eTokens are burnt is LIFO)

  • These minted contracts can now be actively traded in the open market by any user, initial quotes for these will start appearing on our Exchange UI

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