To put the FRR problem a slightly different way... it's using "the average rate of all fixed-rate swaps" to try and approximate the equilibrium point between supply and demand, but it's got its finger on the scales of that equilibrium because so much of the supply and demand it's trying to measure is provided/satisfied by FRR swaps.
Currently, so long as there's a sufficient wall of FRR offers, you can take out a million-dollar swap and leave the rate unaffected... whereas if you did the same thing to the fixed-rate offers it'd tear through to the astronomical rates (if not the entire book of offers) and yank the average abruptly upward. If it could be reformed in such a way that the flash-rate moved in response to offers being taken at the flash rate then... whilst it would still be a bit market-distorting to have so many offers congregated at one point it might at least stop choking the life out of the swap market quite so much, and make it a viable proposition to set a fixed-rate offer higher than the FRR.
I would like to put the same question out to you (and every other swap lender): Can you think of any way to force/compel/prod Bitfinex to address this issue?
From my vantage point, there has been a very good discussions of the FRR, it's effects and possible alternatives over the past few days. Bitfinex has been noticeably absent. If they have a viewpoint, even if it is that the FRR will remain unchanged, it would be encouraging if that would say
something.
I have mentioned my thoughts on this numerous times, and we are listening to your discussion as we plan on how to improve the FRR.