program: amm drawdown check (#865)

* bigz/amm-drawdown-guardrail * add test * add amm pause from drawdown sdk check * update/cleanup switch statement and magintude of drawdown quote * cleanup whitespace * fix lint * fix sdk bug * CHANGELOG --------- Co-authored-by: Chris Heaney <[email protected]>
drift-labs · Feb 15, 2024 · aa5a65c · aa5a65c
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diff --git a/CHANGELOG.md b/CHANGELOG.md
@@ -9,6 +9,7 @@ and this project adheres to [Semantic Versioning](https://semver.org/spec/v2.0.0
 
 ### Features
 
+- program: amm drawdown check ([#865](https://github.com/drift-labs/protocol-v2/pull/865))
 - program: relax oracle guardrail validity check for init margin calc for positive pnl ([#876](https://github.com/drift-labs/protocol-v2/pull/876))
 - program: add more max spread baselines ([#858](https://github.com/drift-labs/protocol-v2/pull/858))
 

diff --git a/programs/drift/src/controller/orders.rs b/programs/drift/src/controller/orders.rs
@@ -970,6 +970,7 @@ pub fn fill_perp_order(
     {
         let market = &mut perp_market_map.get_ref_mut(&market_index)?;
         amm_is_available &= !market.is_operation_paused(PerpOperation::AmmFill);
+        amm_is_available &= !market.has_too_much_drawdown()?;
         validation::perp_market::validate_perp_market(market)?;
         validate!(
             !market.is_in_settlement(now),

diff --git a/programs/drift/src/math/amm/tests.rs b/programs/drift/src/math/amm/tests.rs
@@ -7,6 +7,68 @@ use crate::state::oracle::HistoricalOracleData;
 use crate::state::perp_market::PerpMarket;
 use crate::state::user::PerpPosition;
 
+#[test]
+fn calculate_amm_available_guards() {
+    let prev = 1656682258;
+    let _now = prev + 2;
+
+    // let px = 32 * PRICE_PRECISION;
+
+    let mut market: PerpMarket = PerpMarket::default_btc_test();
+
+    let _oracle_price_data = OraclePriceData {
+        price: (34 * PRICE_PRECISION) as i64,
+        confidence: PRICE_PRECISION_U64 / 100,
+        delay: 1,
+        has_sufficient_number_of_data_points: true,
+    };
+
+    assert_eq!(market.amm.net_revenue_since_last_funding, 0);
+    assert_eq!(market.amm.total_fee_minus_distributions, 0);
+
+    assert_eq!(!market.has_too_much_drawdown().unwrap(), true);
+
+    market.amm.net_revenue_since_last_funding = -100_000_000_000;
+    market.amm.total_fee_minus_distributions = 100_000_000_000;
+
+    assert_eq!(!market.has_too_much_drawdown().unwrap(), false);
+
+    market.amm.net_revenue_since_last_funding = -10_000_000_000;
+    market.amm.total_fee_minus_distributions = 100_000_000_000;
+
+    assert_eq!(!market.has_too_much_drawdown().unwrap(), false);
+
+    market.amm.net_revenue_since_last_funding = -5_000_000_000;
+    market.amm.total_fee_minus_distributions = 100_000_000_000;
+
+    assert_eq!(!market.has_too_much_drawdown().unwrap(), false);
+
+    market.amm.net_revenue_since_last_funding = -1_000_000_000;
+    market.amm.total_fee_minus_distributions = 100_000_000_000;
+
+    assert_eq!(!market.has_too_much_drawdown().unwrap(), true);
+
+    market.amm.net_revenue_since_last_funding = -1_000_000_000;
+    market.amm.total_fee_minus_distributions = 1_000_000;
+
+    assert_eq!(!market.has_too_much_drawdown().unwrap(), true);
+
+    market.amm.net_revenue_since_last_funding = -6_000_000_000;
+    market.amm.total_fee_minus_distributions = 1_000_000;
+
+    assert_eq!(!market.has_too_much_drawdown().unwrap(), false);
+
+    market.amm.net_revenue_since_last_funding = -5_000;
+    market.amm.total_fee_minus_distributions = -9279797219;
+
+    assert_eq!(!market.has_too_much_drawdown().unwrap(), true); // too small net_revenue_since_last_funding drawdown
+
+    market.amm.net_revenue_since_last_funding = -88_000_000_000;
+    market.amm.total_fee_minus_distributions = -9279797219;
+
+    assert_eq!(!market.has_too_much_drawdown().unwrap(), false); // too small net_revenue_since_last_funding drawdown
+}
+
 #[test]
 fn calculate_net_user_pnl_test() {
     let prev = 1656682258;
@@ -40,7 +102,7 @@ fn calculate_net_user_pnl_test() {
     let net_user_pnl = calculate_net_user_pnl(&amm, oracle_price_data.price).unwrap();
     assert_eq!(net_user_pnl, 0);
 
-    let market = PerpMarket::default_btc_test();
+    let market: PerpMarket = PerpMarket::default_btc_test();
     let net_user_pnl = calculate_net_user_pnl(
         &market.amm,
         market.amm.historical_oracle_data.last_oracle_price,

diff --git a/programs/drift/src/state/perp_market.rs b/programs/drift/src/state/perp_market.rs
@@ -11,9 +11,10 @@ use crate::math::constants::{
     AMM_RESERVE_PRECISION, MAX_CONCENTRATION_COEFFICIENT, PRICE_PRECISION_I64,
 };
 use crate::math::constants::{
-    AMM_RESERVE_PRECISION_I128, BID_ASK_SPREAD_PRECISION, BID_ASK_SPREAD_PRECISION_U128,
+    AMM_RESERVE_PRECISION_I128, AMM_TO_QUOTE_PRECISION_RATIO, BID_ASK_SPREAD_PRECISION,
+    BID_ASK_SPREAD_PRECISION_U128, DEFAULT_REVENUE_SINCE_LAST_FUNDING_SPREAD_RETREAT,
     LP_FEE_SLICE_DENOMINATOR, LP_FEE_SLICE_NUMERATOR, MARGIN_PRECISION_U128, PERCENTAGE_PRECISION,
-    SPOT_WEIGHT_PRECISION, TWENTY_FOUR_HOUR,
+    PERCENTAGE_PRECISION_I128, PRICE_PRECISION, SPOT_WEIGHT_PRECISION, TWENTY_FOUR_HOUR,
 };
 use crate::math::helpers::get_proportion_i128;
 
@@ -28,7 +29,6 @@ use crate::state::events::OrderActionExplanation;
 use crate::state::oracle::{HistoricalOracleData, OracleSource};
 use crate::state::spot_market::{AssetTier, SpotBalance, SpotBalanceType};
 use crate::state::traits::{MarketIndexOffset, Size};
-use crate::{AMM_TO_QUOTE_PRECISION_RATIO, PRICE_PRECISION};
 use borsh::{BorshDeserialize, BorshSerialize};
 
 use crate::state::paused_operations::PerpOperation;
@@ -292,6 +292,45 @@ impl PerpMarket {
         PerpOperation::is_operation_paused(self.paused_operations, operation)
     }
 
+    pub fn has_too_much_drawdown(&self) -> DriftResult<bool> {
+        let quote_drawdown_limit_breached = match self.contract_tier {
+            ContractTier::A | ContractTier::B => {
+                self.amm.net_revenue_since_last_funding
+                    <= DEFAULT_REVENUE_SINCE_LAST_FUNDING_SPREAD_RETREAT * 400
+            }
+            _ => {
+                self.amm.net_revenue_since_last_funding
+                    <= DEFAULT_REVENUE_SINCE_LAST_FUNDING_SPREAD_RETREAT * 200
+            }
+        };
+
+        if quote_drawdown_limit_breached {
+            let percent_drawdown = self
+                .amm
+                .net_revenue_since_last_funding
+                .cast::<i128>()?
+                .safe_mul(PERCENTAGE_PRECISION_I128)?
+                .safe_div(self.amm.total_fee_minus_distributions.max(1))?;
+
+            let percent_drawdown_limit_breached = match self.contract_tier {
+                ContractTier::A => percent_drawdown <= -PERCENTAGE_PRECISION_I128 / 50,
+                ContractTier::B => percent_drawdown <= -PERCENTAGE_PRECISION_I128 / 33,
+                ContractTier::C => percent_drawdown <= -PERCENTAGE_PRECISION_I128 / 25,
+                _ => percent_drawdown <= -PERCENTAGE_PRECISION_I128 / 20,
+            };
+
+            if percent_drawdown_limit_breached {
+                msg!("AMM has too much on-the-hour drawdown (percentage={}, quote={}) to accept fills",
+                percent_drawdown,
+                self.amm.net_revenue_since_last_funding
+            );
+                return Ok(true);
+            }
+        }
+
+        Ok(false)
+    }
+
     pub fn get_sanitize_clamp_denominator(self) -> DriftResult<Option<i64>> {
         Ok(match self.contract_tier {
             ContractTier::A => Some(10_i64),   // 10%

diff --git a/sdk/src/math/exchangeStatus.ts b/sdk/src/math/exchangeStatus.ts
@@ -1,11 +1,18 @@
+import {
+	DEFAULT_REVENUE_SINCE_LAST_FUNDING_SPREAD_RETREAT,
+	PERCENTAGE_PRECISION,
+	ONE,
+} from '../constants/numericConstants';
 import {
 	ExchangeStatus,
 	PerpMarketAccount,
 	PerpOperation,
 	SpotMarketAccount,
 	SpotOperation,
 	StateAccount,
+	isVariant,
 } from '../types';
+import { BN } from '@coral-xyz/anchor';
 
 export function exchangePaused(state: StateAccount): boolean {
 	return state.exchangeStatus !== ExchangeStatus.ACTIVE;
@@ -41,10 +48,19 @@ export function ammPaused(
 	}
 
 	if (market.hasOwnProperty('amm')) {
-		return isOperationPaused(market.pausedOperations, PerpOperation.AMM_FILL);
-	} else {
-		return false;
+		const operationPaused = isOperationPaused(
+			market.pausedOperations,
+			PerpOperation.AMM_FILL
+		);
+		if (operationPaused) {
+			return true;
+		}
+		if (isAmmDrawdownPause(market as PerpMarketAccount)) {
+			return true;
+		}
 	}
+
+	return false;
 }
 
 export function isOperationPaused(
@@ -53,3 +69,52 @@ export function isOperationPaused(
 ): boolean {
 	return (pausedOperations & operation) > 0;
 }
+
+export function isAmmDrawdownPause(market: PerpMarketAccount): boolean {
+	let quoteDrawdownLimitBreached: boolean;
+
+	if (
+		isVariant(market.contractTier, 'a') ||
+		isVariant(market.contractTier, 'b')
+	) {
+		quoteDrawdownLimitBreached = market.amm.netRevenueSinceLastFunding.lte(
+			DEFAULT_REVENUE_SINCE_LAST_FUNDING_SPREAD_RETREAT.muln(400)
+		);
+	} else {
+		quoteDrawdownLimitBreached = market.amm.netRevenueSinceLastFunding.lte(
+			DEFAULT_REVENUE_SINCE_LAST_FUNDING_SPREAD_RETREAT.muln(200)
+		);
+	}
+
+	if (quoteDrawdownLimitBreached) {
+		const percentDrawdown = market.amm.netRevenueSinceLastFunding
+			.mul(PERCENTAGE_PRECISION)
+			.div(BN.max(market.amm.totalFeeMinusDistributions, ONE));
+
+		let percentDrawdownLimitBreached: boolean;
+
+		if (isVariant(market.contractTier, 'a')) {
+			percentDrawdownLimitBreached = percentDrawdown.lte(
+				PERCENTAGE_PRECISION.divn(50).neg()
+			);
+		} else if (isVariant(market.contractTier, 'b')) {
+			percentDrawdownLimitBreached = percentDrawdown.lte(
+				PERCENTAGE_PRECISION.divn(33).neg()
+			);
+		} else if (isVariant(market.contractTier, 'c')) {
+			percentDrawdownLimitBreached = percentDrawdown.lte(
+				PERCENTAGE_PRECISION.divn(25).neg()
+			);
+		} else {
+			percentDrawdownLimitBreached = percentDrawdown.lte(
+				PERCENTAGE_PRECISION.divn(20).neg()
+			);
+		}
+
+		if (percentDrawdownLimitBreached) {
+			return true;
+		}
+	}
+
+	return false;
+}
diff --git a/sdk/tests/dlob/helpers.ts b/sdk/tests/dlob/helpers.ts
@@ -181,6 +181,7 @@ export const mockPerpMarkets: Array<PerpMarketAccount> = [
 		},
 		quoteSpotMarketIndex: 0,
 		feeAdjustment: 0,
+		pausedOperations: 0,
 	},
 	{
 		status: MarketStatus.INITIALIZED,
@@ -219,6 +220,7 @@ export const mockPerpMarkets: Array<PerpMarketAccount> = [
 		},
 		quoteSpotMarketIndex: 0,
 		feeAdjustment: 0,
+		pausedOperations: 0,
 	},
 	{
 		status: MarketStatus.INITIALIZED,
@@ -257,6 +259,7 @@ export const mockPerpMarkets: Array<PerpMarketAccount> = [
 		},
 		quoteSpotMarketIndex: 0,
 		feeAdjustment: 0,
+		pausedOperations: 0,
 	},
 ];
 
@@ -341,6 +344,7 @@ export const mockSpotMarkets: Array<SpotMarketAccount> = [
 			lastIndexPriceTwap5Min: PRICE_PRECISION,
 			lastIndexPriceTwapTs: new BN(0),
 		},
+		pausedOperations: 0,
 	},
 	{
 		status: MarketStatus.ACTIVE,
@@ -422,6 +426,7 @@ export const mockSpotMarkets: Array<SpotMarketAccount> = [
 			lastIndexPriceTwap5Min: new BN(0),
 			lastIndexPriceTwapTs: new BN(0),
 		},
+		pausedOperations: 0,
 	},
 	{
 		status: MarketStatus.ACTIVE,
@@ -503,6 +508,7 @@ export const mockSpotMarkets: Array<SpotMarketAccount> = [
 			lastIndexPriceTwap5Min: new BN(0),
 			lastIndexPriceTwapTs: new BN(0),
 		},
+		pausedOperations: 0,
 	},
 ];