Status: Proposed Author: @Matthew_Graham and @funkmasterflex Reviewer: @afromac and @allan.g Date: 06/17/2022 Discussion to: https://gov.indexcoop.com/t/iip-157-reduce-iceth-fees/4300

Simple Summary

This proposal presents the opportunity to INDEX holders to reduce the icETH Redeem fee from 25bps to 0bps.

Abstract

In the current fee structure on icETH is as shown below:

Streaming Fee: 75bps Mint Fee: 0bps Redeem Fee: 25bps

After additional market research and collecting feedback from core customer categories, we would like to propose that each of these fees be reduced to…

Streaming Fee: 75bps Mint Fee: 0bps Redeem Fee: 0bps

Reducing these fees will lead to a better user experience whereby users don’t forgo weeks/months of accrued yield when redeeming the icETH position.

Motivation

Market research has indicated one of the largest barriers to purchasing icETH at size is the redeem fees. This proposal removes the redeem fee and will enable the product to more accurately track the Net Asset Value (NAV) as arbitrage traders do not need to allow for the redeem fee upon interacting with the exchange issuance module.

After further market validation, we believe that reducing the redeem fee will have a positive impact on N$F from large buyers and protocol integrations. Large buyers, whether whales, hedge funds, DAOs, or asset managers have shown pushback on the mint/redeem fees and the effect of the fee on product yield.

Considering recent NAV decay from rebalancing and current market conditions, further fees to get out of the position will continue to be a major hurdle for large potential buyers. In addition, we expect to see an uptick in N$F with the nearing completion of the icETH ERC-4626 wrapper. These types of yield integrations are very competitive and sensitive to fees. Any advantage in yield will have a major impact on the adoption of this strategy and the 0 bps redeem fee makes it a much easier integration.

Specification

icETH fees will be amended to reflect the below. This change will be implemented by @edward’s team shortly after the proposal passes a community snapshot vote.

Streaming Fee: 75bps Mint Fee: 0bps Redeem Fee: 0bps

Voting

FOR: Eliminate 25 basis points Redeem Fee for icETH in accordance with specification.

AGAINST: Make no change to icETH fee structure.

Copyright

Copyright and related rights waived via CC0 .