Seat duties and slashing

A seat is not only a set of rights. During regular trading hours the regent carries an obligation modelled on the designated market makers of stock exchanges: keep the pool price close to the real one, or lose part of the bond. This page covers when the duty applies, how the band is drawn, and how slashing is counted.

When duties apply#

Duties are active only when all four conditions hold at the same time:

If any one of them fails, duties are off and no breach-seconds accrue. On an early-close day DAY ends at 13:00 ET, and duties end with it. The calendar rules are on Sessions and the calendar.

The band#

While duties are active, the pool price must stay within ±max(current fee, 0.30%) of the oracle price.

With a fee at or below 0.30%, the band is ±0.30%. With a higher fee, the band is as wide as the fee, up to the DAY cap of 0.50%. A price sitting exactly on the edge counts as inside.

Why the band is tied to the fee#

A trader who pays a fee does not see the pool price. He sees the pool price plus the fee. A deviation smaller than the fee is therefore not a mispricing anyone but the regent can act on, and it would be incoherent to punish the regent for a gap that the fee he is allowed to charge already covers. So the band is never tighter than the fee.

The same logic cuts the other way. Third-party arbitrage only corrects the price once the deviation exceeds the fee plus the arbitrageur's own costs. With a low fee, outside arbitrageurs push the price back long before it reaches the ±0.30% edge, and the regent's duty is mostly performed for him. With a high fee, outsiders only step in at or beyond the band edge, which is too late. The only participant for whom a correction inside the band is profitable is the one who swaps at 0%: the regent.

A regent who sets a high fee has therefore chosen to do the work himself. He collects more per swap, he gets a wider band, and he alone is responsible for staying inside it.

Grace, then breach#

Leaving the band is not a breach. Staying out is.

1. The price leaves the band. A counter of continuous seconds outside starts.
2. If the price returns inside the band before 60 s have passed, the counter resets to zero. Nothing happens.
3. Every second beyond 60 s outside the band is one breach-second.
4. When the price re-enters the band the counter resets, and a later excursion gets a fresh 60 s of grace.

The grace period exists because prices move in steps. An oracle update can put the pool outside the band through no fault of the regent, and he needs a moment to rebalance. It is long enough for an attentive operator with ~100 ms blocks, and far too short for an absent one.

Slashing per breach-second#

Each breach-second slashes a fixed share of the regent's posted $RGNT bond. The slashed amount is split three ways:

Slashing is capped by what is left of the bond. A regent cannot lose more than he posted, and his escrowed bid is not touched by slashing: it keeps streaming to LPs as rent.

poke is permissionless#

Contracts do not run by themselves. Someone has to submit the transaction that checks the band and converts accrued breach-seconds into a slash. That function is poke(), and anyone can call it: an LP, a competing market maker, a bot that does nothing else.

The caller receives 10% of the slash. Without that payment, enforcement would depend on goodwill or on a privileged keeper, and both fail quietly. With it, watching the regent is a small business anyone can run, and the people most likely to run it are the regent's competitors. Breach-seconds accumulate until someone pokes, so a late poke does not let the regent off; it only pays the caller more.

A worked breach#

Take an illustrative regent on a $4M pool with a posted bond of 10,000 RGNT. During DAY the oracle moves, the pool does not, and the regent's systems are down.

At the assumed rate a bond is fully consumed after 2,000 breach-seconds. A regent whose pool stays outside the band for that long has no bond left, and the DAY session is many times longer than that.

Halts suspend duties#

When trading in the underlying stock is halted, there is no price to track. Duties are suspended for the length of the halt, no breach-seconds accrue, and the fee cap is raised. On resumption a new bell window of 20 seconds opens, because the resumption price is a gap like any other. Details are on Edge cases.

No duties off-hours#

No duties off-hours: there is no reference price, and the protocol does not pretend otherwise.

In POST, NIGHT and WEEKEND sessions the regular market is closed. OPEN is duty-free as well: it is the price-discovery period right after the bell, and duties start with DAY. A duty needs a reference. Enforcing a band around a stale Friday close, or around a thin after-hours print, would slash honest regents for being right and reward dishonest ones for tracking a wrong number. So the design does not try. Off-hours the regent has rights and no duties, the fee caps are wider to reflect the risk, and the price he keeps is his own business.

This is a limit of the design, not a feature. Traders who use a Regent pool at night should expect wider fees and a price that nobody is obliged to maintain. See Risks and disclaimers.