Summary
TIP-17 outlines an agreement for market making services to be provided by Flowdesk SAS (“Flowdesk”) as a market-making-as-a-service’ partner who will operate on a monthly retainer basis to provide liquidity for MAGIC tokens listed on Flowdesk supported exchange(s), subject to finalizing an agreement.
Rationale
We believe TIP-17 and a partnership with a market maker will serve the following purposes for TreasureDAO (“Treasure”):
- Increase accessibility, liquidity and volume of MAGIC across decentralized exchanges (“DEXs”), centralized exchanges (“CEXs”) and the global over-the-counter (“OTC”) market for the benefit of ecosystem users, partners and the DAO treasury.
- Strengthen trust in Treasure and unlock new partnerships by building a strategic relationship with a leading name in the crypto market making space.
- Enable access to new markets and improved onboarding through a broader range of go to market options.
These are all important steps towards the maturation of the MAGIC token and of the Treasure ecosystem as a whole.
Research and Process
Treasure initiated its search for a market maker in August and has met with, evaluated, and received offers from close to 10 different providers, including many of the top names in the space. A competitive process was run to evaluate market makers across a number of different criteria, including: reputation, model (loan and option vs. retainer), algorithm, CEX and DEX strategy, fees and collateral/working capital requirements, loan sizes, strike prices, term duration, size and depth, spread, exchange support, volatility and volume, uptime, and ongoing support through account management and reporting. Following the initial proposal process, the council narrowed the search to three market makers and underwent thorough negotiations before landing what we believe to be the best offer provided by Flowdesk.
The timing of this proposal aims to balance the most favourable terms amidst a volatile and uncertain economic backdrop, all while looking ahead to ensure MAGIC and Treasure is in a strong position to capitalize upon increased attention on Arbitrum in recent times resulting from the launch of Nitro and Nova, the revival of its Arbitrum Odyssey Campaign, and other upcoming catalysts. We believe that working with Flowdesk as Treasure’s initial market maker will help us get to where we want to go and have been building towards, faster.
About Flowdesk
Flowdesk was founded in 2020 and combines significant experience from traditional markets with acute knowledge of algorithmic trading and crypto. They have developed a proprietary trading infrastructure which integrates more than 85 CEXs and DEXs, and executes over 2M orders daily. Flowdesk employs 55 people and has an office in Paris and Singapore. They expect to grow to 70-80 employees by year-end. In June, Flowdesk announced a $30M raise and are backed by Eurazeo, Aglae, Fabric Ventures, Ledger, Coinbase Ventures.
Difference in Market Making Models:
- Loan and Option: Market makers are loaned a supply of tokens based on mutually agreed upon terms to be paid back in full after the length of the contract. The market maker will fund this loan from their own accounts to “make the market”.
- **Retainer: **Market makers leverage working capital provided by the project and are paid on a periodic (eg. monthly) retainer with the aim to operate at a flat P&L and are focused on increasing market turnover by offering tighter bid-ask spreads.
Proposal
To approve Flowdesk as an official partner of Treasure operating on a ‘market-making-as-a-service’ model on a monthly retainer basis for $3,500 per month to provide liquidity for MAGIC tokens listed on Flowdesk supported exchange(s).
- **Initial contract duration: **3 months
- **Monthly retainer cost: **$3,500 per month
- Initial working capital requirements:
- **CEX: **$150k equiv. in MAGIC and $150k equiv. in USDT
- **Sushi: **$150k equiv. in MAGIC and $150k equiv. in ETH
- **Profit sharing: **Treasure will receive 100% of any potential profits
- **Other offered services: **Flowdesk will provide ongoing account management, reporting (daily and monthly reports), and service via Telegram chat.
- **Use of working capital: **Flowdesk will use the working capital solely to provide liquidity to MAGIC markets and it will not be staked or dilute yields.
Upon ratification of this proposal, the CEX account managed by Flowdesk would be funded with the requisite funds in order to commence trading. In the event that Treasure would like to initiate a withdrawal to return funds from Flowdesk’s custody, a request would be initiated using Telegram with validation provided through a form to be processed within 24 hours at the latest.
_Please also note: _
- The working capital, size, depth, and spread relating to the operations with Flowdesk are adjustable and are dependent on the strategy undertaken at the time, targeted metrics, and number of exchanges to be supported.
- Treasure is considering working with additional market making partners that may be necessary to facilitate any potential CEX listings.
Polling Period
The polling process begins now and will end on September 29, 2022 at 1:09pm UTC. If quorum is reached, a Snapshot vote will be put up on October 1, 2022 at 1:09pm UTC.