Quote from: Ichthyo on February 19, 2013, 06:12:04 AM

Quote from: ThaddeusB on February 19, 2013, 05:52:24 AM

There has got to be some sort of problem with the way the variable rate is calculated (unless maybe 90% of all loans are variable) as the rate has now dropped to 712% on a <$2000USD loaned difference...

If there is truly nothing wrong with the calculation, I strongly suggest traders stop using variable rate loans as you can really get screwed by small amount of USD lent at very high rates it seems.

I think the effect is really insidious.
I don't know if I'm missing out some feature here, but as far as I know, you can't control the loans you pick when opeining a trade. The only other possibility is to borrow beforehand, which works, but is tedious. Thus, basically if you just have some market or limit/stop order placed, you get the "best" lending offer.

Now, yesterday a huge pile of VIR offers were on market, thus you allways got the VIR loans first. They were cheap, thus no problem. But now you're holding a position based on a VIR offer, and now the VIR rate shoots through the ceiling. Just because some traders accidentally take one of those exaggerated offers. These really poison the average. Especially when those lenders offering for fixed rate cancel their offers and place higher offers instead. This way, a tiny fraction of the offerings can influence the whole lending market.

Actually I witnessed this happen. When I came back, almost all of the fixed rate offers were gone. During some minutes, my swap literally counted up. First I didn't even realise what was going on and thought this was a technical problem, until I looked on the order history and lending page and realised that one of my limit orders had executed and I had gotten one of those poisoned offers.

Yes, I meant by manually borrowing. It did not even occur to me automatic buy orders were occurring. Automatic buy order+unknown interest rate is potential suicide, so a feature to pick maximum loan rate would seem essential. (Or maybe system should block, or at least warn, about to use of "stop" orders to open positions... They really are intended for closing a position, hence the name stop as in "stop losses".)

Quote from: Ichthyo on February 19, 2013, 05:56:51 AM

But as it stands now, I see some weaknesses in the mechanics, which allow to game the engine and harm other traders.

for one, the VIR rates. I still think it is dangerous to prefer those automatically. We discussed that some weeks ago. I still keep my stance that there should be some damping factor and some cap built into the automatically determined variable rate. Earlier this day, during the rally, we had the situation that a large fraction of the overall offered money was in VIR loans. This allowed a smaller amount of fixed rates to drive up the overall rates. I know for sure, because I was burnt by it. I was one of them accidentally taking one of those insane offers, thereby promoting it into the effective average rate. The VIR rates shoot up to over 6000% during that rally
an important effect to consider are automatic orders. This is what happened to me. Since there was not only a huge wall, but a lot of additional Asks below 27.5, I actually didn't expect that rally to set in so soon. So I had some automatic offers right above the wall. I guess other people did the same. Before the rally, there were way enough "sane" offers in the pipeline. When I came back, all of them were taken (or more likely just retracted) and instead there was a whole pile of exaggerated offers. This way, lenders manage to "sneak" into getting accepted. No one would deliberately open a position when the loan rate is 300% per day! But the orders execute automatically.

I agree it is stupid that VIR loans get preference. For example, I noticed that a 200%/year 60 day offer was just sitting there while a 1000+% VIR offer was being bought up at some point. At minimum, the fixed rate should be preferred if it is lower than the VIR (which in turn would lower the VIR for later buyers.) I am shocked that is not the case - I assumed it was a technical glitch, not a feature, when I saw it happen.