SIP 154: Create synths for top traded US stock index etfs Source

AuthorFinanceGuy82415
Discussions-Tohttps://research.synthetix.io/t/equity-stock-index-synths/324
StatusDraft
Created2021-02-05

Simple Summary

Create Equity Synthetics on the top 3 traded US stock index etfs (S&P 500, Nasdaq 100, Russell 2000)

Abstract

This SIP will create 3 new synths sSPY, sQQQ, sIWM based on top US stock etfs SPY, QQQ, and IWM.

Motivation

Given the importance of US stock market in the world financial system, offering synthetics on a comprehensive set of top traded US equities is key for both Stakers (volume) and Traders (risk management beyond crypto). The current available TSLA synth (as well as FAANG/MSFT synths proposed in recent SIPs) offer exposure to some of the most popular US tech stocks, but they aren’t a comprehensive offering from investing or risk management perspective. These stocks are all under the same category of “growth”/”tech”/”momentum” and lack diversification into different types of risks that may be preferred with changing market conditions and/or risk appetite.

Specification

Overview

This SIP will add three new synths that will provide both diversification and new risk exposure on three of the most heavily traded US stock indices.

Rationale

I propose SPY, QQQ, and IWM, because

  1. SPY is the most traded stock etf in the world tracking the S&P 500 index (widely used benchmark of large cap US companies)
  2. QQQ is the most traded stock etf tracking the NASDAQ index (widely used benchmark of US tech stocks)
  3. IWM is the most traded stock etf tracking the Russell 2000 index (widely used benchmark of small-cap US companies) Also even though these are US stocks, it should be emphasized that investors/traders around the world speculate and hedge risk with US equities given the maturity of the market as well as the influence of the US economy globally.

I think this will prove to be a significant step for Synthetix in growing its equity offerings not just for retail, but for institutional use as well.

This will benefit both stakers (increased volume & more diverse flows -> debt neutrality) and traders (more comprehensive exposure to US stock markets for speculation/hedging)

Technical Specification

Test Cases

Configurable Values (Via SCCP)

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