SIP-2: Position Yield

Summary

This proposal introduces Position Yield, a fee-distribution mechanism for eligible perpetual positions on StandX.

Under SIP-2, a configurable portion of eligible protocol fee flow is allocated to positions that remain open in accordance with protocol-defined rules. The mechanism is intended to extend fee participation from discrete execution events toward time-qualified position participation, without changing the core semantics of execution, funding, margining, or liquidation.

SIP-2 applies to eligible perpetual positions on StandX regardless of how such positions are opened, provided that they satisfy the same eligibility, accounting, and risk conditions.

The proposal is intended to establish a formal framework for:

• defining when an open position is eligible for fee participation
• measuring position-based participation over time
• allocating a configurable fee pool across eligible positions
• constraining non-qualifying behavior through explicit protocol rules

Motivation

StandX currently supports perpetual trading through its existing execution architecture.

As the protocol evolves, it is reasonable to consider whether the protocol should also recognize the role of open positions over time, rather than limiting fee-related participation to the moment of trade execution.

In the current system, incentives are primarily associated with discrete trading actions, such as order placement, execution, or other event-based activity. This proposal considers a different unit of participation: the eligible open position.

The rationale for doing so is structural.

Open interest is not only a byproduct of trading activity. It is also part of the protocol’s market state. The duration, distribution, and composition of open positions may influence how protocol activity persists across time, how execution mechanisms interact with holding behavior, and how fee flow is reflected within the system.

SIP-2 proposes a framework under which eligible positions may participate in a portion of protocol fee distribution, subject to explicit rules, parameterization, and risk controls.

This extends the protocol in the following ways:

• it introduces position duration as a measurable and rewardable protocol variable
• it links fee participation to continued position presence rather than only to entry activity
• it creates a common framework that applies across all supported position-opening paths
• it expands the set of supported on-protocol behaviors without modifying the core semantics of execution or liquidation

Accordingly, the purpose of SIP-2 is not to redefine trading itself, but to introduce an additional protocol layer around time-qualified position participation.

This proposal is intended to formalize that layer in a way that is:

• transparent
• parameterizable
• compatible with existing perps infrastructure
• bounded by explicit protocol and risk constraints

In that sense, SIP-2 should be understood as a market-structure extension to the StandX perps system, adding a new mechanism for relating open interest, time, and fee distribution within the protocol.

Specification

Roles

Position Holder
An account with one or more eligible perpetual positions on StandX.

Protocol
The StandX system responsible for computing eligibility, maintaining accounting state, applying protocol rules, and settling Position Yield.

Fee Pool Manager
The protocol function, treasury policy, or governance-controlled configuration that determines which portion of eligible fee flow is routed to Position Yield.

Scope

Position Yield applies only to perpetual positions recorded on the StandX perps system.

Eligible positions may originate from any supported opening path, including but not limited to:

• standard order book execution
• market orders
• limit orders
• block trade settlement
• other protocol-approved execution paths

For purposes of SIP-2, the relevant unit is the resulting open position, not the opening path.

The following do not constitute eligible positions for purposes of SIP-2 unless expressly approved in a later proposal:

• idle wallet balances
• spot balances
• vault deposits
• unmatched orders
• pending settlement states
• off-protocol positions

Definitions

Distribution Epoch

A fixed accounting interval over which Position Yield is computed.

Within each Distribution Epoch, the protocol determines position participation according to protocol-defined observation rules. Such rules may measure whether, and to what extent, a position remains eligible across multiple observation intervals during the epoch.

The protocol may choose, by configuration:

• hourly accounting with daily settlement
• daily accounting with daily settlement
• daily accounting with weekly settlement
• other intervals approved by governance

Reward Asset

The asset in which Position Yield is distributed.

This may include:

• DUSD
• another designated protocol asset
• multiple assets if supported by protocol accounting

The reward asset is configurable.

Position Yield Pool

For each Distribution Epoch, the protocol computes a Position Yield Pool.

The pool is defined as:

Position Yield Pool = Configured Ratio × Net Eligible Fee Flow

Where:

• Configured Ratio is a protocol-defined parameter
• Net Eligible Fee Flow is the portion of fee flow included in SIP-2 after any protocol-defined exclusions, deductions, or adjustments

Unless otherwise configured, eligible fee flow may include:

• perp trading fees
• order book execution fees
• block trade execution fees
• other explicitly approved perps fee categories

Unless otherwise configured, the following should be excluded:

• liquidation penalties
• insurance fund inflows
• bad debt recoveries
• treasury transfers
• external subsidy distributions
• one-time administrative credits

This distinction is intended to ensure that Position Yield is derived from ordinary protocol fee activity rather than from unrelated capital movements.

Eligibility

A position is eligible for Position Yield only if all relevant conditions are satisfied.

1. Successful Position Record

The position must be successfully opened and recorded within the StandX perps system.

Eligibility begins only after the position enters a valid open state recognized by the protocol.

2. Minimum Holding Requirement

A position must remain open for at least Min Hold Time before it may participate in Position Yield accounting.

This parameter is configurable.

Satisfaction of the minimum holding requirement does not by itself guarantee full accrual for an epoch; the position must also remain eligible under the protocol’s observation and accounting rules for that epoch.

3. Risk-Valid State

A position accrues yield only while the corresponding account remains in a protocol-valid state.

A position may be excluded from accrual during periods in which:

• account health falls below a configured threshold
• the account enters liquidation flow
• the position is subject to protocol-imposed restrictions
• the protocol flags the position state as ineligible for accrual

4. Supported Market

Only markets explicitly enabled for SIP-2 are eligible.

The protocol may apply SIP-2 to:

• all supported markets
• a subset of supported markets
• markets with differentiated parameters

5. Rewardable Leverage Constraint

To bound reward extraction through excessive notional supported by minimal collateral, the protocol may define a Max Rewardable Leverage.

This may be enforced as:

• a hard exclusion threshold
• a soft haircut above threshold
• a tiered rewardability model

The exact enforcement method is configurable.

Reward Accrual

Principle

SIP-2 is intended to allocate fee participation according to time-qualified, risk-valid, rewardable position exposure.

It is not intended to reward:

• unmatched trading intent
• transient notional spikes
• purely formal position creation without durable position presence
• position states that do not satisfy protocol eligibility conditions

Reward Score

For each eligible position, the protocol computes a Reward Score.

A generic form is:

Reward Score = Rewardable Notional × Eligible Participation × Market Weight × Side Weight × Adjustment Factors

Rewardable Notional

Rewardable Notional = min(Mark-Price Position Notional, Account Cap, Market Cap)

Mark-price notional is used in preference to entry-price notional so that reward accounting remains based on current position size rather than execution-specific conditions.

Eligible Participation

Eligible Participation represents the extent to which a position remains open and eligible throughout the protocol-defined observation process for a given Distribution Epoch.

Eligible Participation may be derived from recurring observation intervals, checkpoints, snapshots, or similar accounting methods defined by the protocol.

Only participation occurring after the minimum holding requirement is satisfied counts toward Reward Score.

Market Weight

The protocol may assign different weights to different markets.

This may be used to:

• standardize treatment across markets
• emphasize specific markets
• reduce exposure to more easily manipulated markets

Side Weight

The protocol may assign different weights to Long and Short positions on a per-market basis.

This may be used where governance determines that side-specific weighting improves market structure or pool balance.

Adjustment Factors

The protocol may apply reductions or exclusions to Reward Score where position behavior falls outside protocol-defined qualification rules, including but not limited to:

• short-duration cycling around epoch boundaries
• non-qualifying risk states
• protocol-defined abnormal participation patterns
• other behavior inconsistent with the intended operation of SIP-2

Allocation

At the end of each Distribution Epoch:

User Reward = Position Yield Pool × (User Total Reward Score / Aggregate Reward Score)

Where:

• User Total Reward Score is the total eligible score attributable to the user for the epoch
• Aggregate Reward Score is the total eligible score across all users for the epoch

The protocol may implement one of the following pool structures:

Global Pooling

A single Position Yield Pool is shared across all supported markets.

Market-Specific Pooling

Each supported market has an independent Position Yield Pool.

Hybrid Pooling

A base pool is distributed globally, while additional market-specific pools are distributed separately.

Market-specific or hybrid pooling may provide better parameter control and clearer market-level accounting.

Position Opening Path Neutrality

SIP-2 does not distinguish among supported position-opening paths for purposes of reward eligibility.

So long as a position is validly opened, recorded by the protocol, and remains eligible under SIP-2 rules, it is treated under the same reward framework.

Accordingly:

• a position opened through the order book is eligible on the same basis as any other supported path
• a position opened through block trade settlement is eligible on the same basis as any other supported path
• execution method does not, by itself, increase or reduce Position Yield eligibility

Reward accounting is based on the resulting open position and its qualifying characteristics over time, rather than on how that position was created.

Qualification and Risk Controls

Because SIP-2 creates a new fee-participation surface, the protocol may enforce additional controls beyond standard execution and liquidation logic.

These controls should focus primarily on whether a position satisfies protocol-defined qualification conditions, rather than on introducing unnecessary distinctions among users or execution paths.

1. Minimum Duration and Cooldown Rules

The protocol may enforce:

• minimum holding requirements
• cooldown periods for newly added notional
• delayed accrual for materially increased positions

This reduces short-horizon cycling and end-of-epoch notional insertion.

2. Reward Caps

The protocol may impose caps on:

• rewardable notional per account
• rewardable notional per market
• Reward Score per epoch
• reward payout per account

3. Position-State Qualification

The protocol may reduce or exclude accrual where a position enters a state that is inconsistent with SIP-2 participation, including:

• unhealthy margin conditions
• liquidation-related states
• restricted position states
• other protocol-defined ineligible states

4. Automated and Discretionary Enforcement

The protocol may delay, adjust, void, or claw back rewards where accounting anomalies, rule violations, or abnormal participation patterns are identified.

Persistent or material violations may result in:

• exclusion from SIP-2
• temporary reward suspension
• broader account restrictions under platform policy

Settlement

At the end of each Distribution Epoch, computed rewards are settled to eligible users.

Settlement Cadence

The default settlement cadence is daily. The protocol may configure a different settlement cadence on a per-market basis — for example, certain trading pairs may settle on a longer or shorter cycle depending on market characteristics and governance decisions.

Settlement Mechanism

The protocol supports the following settlement mechanisms:

Automatic Credit — Rewards are automatically credited to the user’s trading account balance after epoch settlement. No user action is required.

Claimable Balance — Rewards accrue to a claimable balance. The user must initiate a claim to transfer rewards to their trading account.

The specific settlement mechanism will be determined prior to launch. Both options are architecturally supported and may be changed by governance after initial deployment.

The protocol may additionally specify:

• minimum reward threshold
• settlement delay relative to epoch end
• claim windows (if claimable)

These parameters are configurable.

Governance and Parameters

The following parameters are configurable and may be adjusted by governance or authorized protocol configuration:

• Position Yield fee ratio
• reward asset
• distribution epoch length
• observation methodology
• minimum holding requirement
• supported markets
• market weights
• side weights
• maximum rewardable leverage
• account- or market-level caps
• Market-Specific Pool designations and parameters
• cooldown rules
• qualification thresholds
• settlement mechanism (automatic credit or claimable)
• minimum reward threshold

Unless explicitly stated otherwise, parameter updates should apply prospectively and should not retroactively alter already settled epochs.

Rationale

SIP-2 introduces a new accounting and distribution layer for the StandX perps system.

Its purpose is to make position duration and valid open interest relevant to fee participation, while maintaining compatibility with existing execution logic and preserving protocol control over qualification and risk.

This proposal does not distinguish reward eligibility based on execution path. Rather, it defines a framework under which any eligible perpetual position may become rewardable if it satisfies protocol-defined constraints.

SIP-2 should therefore be understood as a position-based extension to the StandX perps system, under which fee participation is linked to qualifying open interest over time.

Backward Compatibility

SIP-2 does not alter:

• matching semantics
• order priority
• funding mechanics
• margin accounting
• liquidation semantics
• market data behavior

Instead, it introduces an additional reward-accounting layer on top of existing position states.

Protocols, accounts, and positions not participating in SIP-2 continue to function unchanged.

Security Considerations

SIP-2 introduces additional complexity in reward accounting, epoch settlement, qualification logic, and parameter governance. Primary risks include short-duration cycling for reward extraction, size insertion around epoch boundaries, concentration of rewards in a small number of accounts, and accounting disputes arising from complex eligibility states. To mitigate short-duration exploitation, a position must have experienced at least one complete funding rate settlement cycle before it can accrue Position Yield — positions opened and closed within a single funding interval are excluded from reward accounting. Any production rollout should begin with conservative parameters, clear observability, and the ability to pause, haircut, or amend reward logic if abnormal patterns emerge.

Future Extensions

Future proposals may extend SIP-2 to support:

• loyalty multipliers based on position duration
• market-specific subprograms
• fee-contributor weighting
• dynamic side balancing
• optional vesting-based reward treatment
• deeper composability with later SIPs

Such extensions should be introduced only after the base SIP-2 framework has been observed in production and the relevant behavior patterns are understood.