I'd rather have other options for variable rates than FRR. Limiting FRR arbitrarily with "magic" values (100k USD? 500k USD? 50k?) is not really useful imho.
Not at all. As it has been said , it should be a percentage (say 25%...?).
FRR used to work well in the past, at a time when total available volume for lending was much less than today. Back then, the FRR "wall" was very rarely above some $200K, it was gone several times a day, and this was on the "background" of about some $500K in total offers.
It was exactly this fact, that the "wall" was frequently gone, which allowed lenders to try placing their offers
outside of the FRR rates and it WORKED!!!.
This is what limiting order book's FRR to a defined fraction of total offers will recreate.
There is no arguing that there is always going to be much more offers around current FRR rates and this is the case with trading order books too, this is just human nature. But, a
smooth bell-shaped set of offers, which are spread over adjacent values to some degree is much better for proper rate/trend discovery, than a huge, single point value WALL.