Quote from: Arthur Randolph on January 26, 2014, 06:37:40 PM

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Quote from: gog1 on January 26, 2014, 06:13:28 PM

I really think they should take away the flash return rate concept. Every lending offer / borrowing request should be either limit order or market order (ie. hitting up the lowest available lending offer or highest borrowing request).

The FRR does help dampen the sometimes crazy swings of the best interest rate as provides a form of mid-market rate for the lazy.
The situation is a bit asymmetric though.
In an up market, traders are at an advantage because their default settings is to pick either fixed or variable rates, whichever is lower, and they can sometimes snag some FRR offers when the rate lags. On the other hand, lenders have to decide whether they want to (auto-)loan at fixed or variable rate, but not both.
This causes the situation where offers are either taken at a suboptimal rate or not at all (since there's a better offer on the other side of the FRR/Fixed choice).
It would greatly help if FRR had some other form of incentive, such as lower fees or liquidity guarantees.

Let me be cynical and think from platform perspective first, having all these lending offer / borrowing request not filled is sub-optimal for bitfinex it self in lost commission. Having wild swing in interest rate is actually not a big problem for bitfinex, it spurs more borrower to adjust to try to take advantage of low interest rate, ie. more commission for them. I just see the game tilted too much toward the borrower side, lately, we see a couple of hundred thousands pop up on the FRR on the borrowing side and interest rate keep getting manipulated down despite margin loan at or near all time high. The FRR, to be honest, doesn't really offer much for the lender, you will not get neither a guarantee rate (assuming the order is filled) nor the optimal rate.

Beside, most asset market (stock, bond, etc.) order book is all limit or market order base. This FRR really skews thing completely.