Not at all. As it has been said , it should be a percentage (say 25%...?).
I think this would be prone to manipulation. If it's a percentage of active swaps and the swaps offers go down, what do you do? Drop people from the FRR? If I was a big lender I would place a large high value swap, wait for the FRR to fill and then rescind it. If I was big enough, that would kick a number of offers out of the FRR until they re-offered.
I think that we all need to realize the landscape has changed somewhat. IIRC, it was DoubleDipper who posted that more and more lenders where treating the swaps like a 'savings account', and I think he is correct. The FRR enables that behavior.
A different suggestion would be to make FRR ONLY available for 30 day offers. Then rate discovery could happen with shorter timeframe loans while FRR would still not have to be capped.
I was under the impression that some traders will pay a premium for 30 day terms. What if the term had to be 30 days and FRR offers locked in at the rate it was taken and did not float during the swap's duration?
What did you think about my suggested combination of "smaller interest if position = negative + larger share of profit if position is positive" a few posts back?
I'm not a trader, but I would have to imagine that this would be interesting to them. I would like to hear what other lenders think. My first impression is that this would be more risky for the lender. If the lender is negative, the position is more likely to be closed. What do you think would happen during a flash crash?
I fall towards the "very active" end of the spectrum for swaps - using email notifications as a trigger to go and re-offer funds, sizable spreadsheet recording it all to predict the daily payment and do various other maths to things, using fixed rates somewhat religiously. So I'd be happy to see the FRR simply scrapped but I can understand that being a source of irritation for anyone who's aiming for a more "set it and forget it" approach.
I think you hit the nail on the head. The FRR serves the passive lenders and works against the active ones. The tide seems to have turned to where there are now more passive lenders than active.
If there was someway to de-incentify the FRR, it might be able to be saved. What if the fee was 10% for fixed rate swaps and 15-20% for FRR? What if FRR swaps floated down but only up to the rate it was taken (altough this might cause even more trader demand for FRR swaps)?