HIP-13: Suspend zNVDA market ahead of Stock Split and convert zNVDA to zUSD

Suspend zNVDA ahead of stock split on June 6, 2024, and convert remaining zNVDA to zUSD.

Type: Horizon Improvement Proposal

Date: May 24th, 2024

Status: Completed

Summary

Temporarily suspend trading of zNVDA after market close on June 6, ahead of the upcoming NVDA 10-for-1 stock split. Convert any remaining zNVDA to zUSD at the last market price before the split. And resume trading zNVDA on June 10, after the stock-adjusted price has traded on the traditional markets and is live and stable on the Chainlink price feed. Establish a system to be implemented in case of future stock splits consisting of three steps: 1. Suspend the affected zAsset market after the underlying market closure by calling the suspendSynth function in the SystemStatus contract 2. Convert remaining zAssets to zUSD via the Horizon Protocol DAO multisig, to protect holders from losing value due to the split. 3. Resume the affected zAsset market after the price feed is live and stable.

Specification

• On June 6th, 8:00 pm UTC, the zNVDA market will be closed on Horizon Spot Exchange via the suspendSynth function in the SystemStatus contract.

• After the market is closed, the Horizon Protocol DAO multisig will automatically convert remaining zNVDA tokens to zUSD at the market closing price prior to the stock-split.

• Trading of zNVDA will resume as normal after the live markets open on Monday, June 10th 1:30 pm UTC and the Chainlink NVDA oracle is reporting the correct split-adjusted price data.

Motivation

Nvidia has announced a 10-for-1 stock split and the trading with the new stock-split adjusted price will begin on June 10. The stock split adjusted price will be significantly lower than the pre-adjusted price and will have a direct impact on any user who holds the zNVDA zAsset on Horizon Protocol..

Users who hold zNVDA through the stock split will be at risk of having the value of their zNVDA holdings be significantly devalued. Which, in the given case they are stakers, could additionally limit their ability to manage their C-Ratio, since the value of their zAsset holdings will be reduced.

zNVDA holders will be advised to swap to zUSD or the zAsset of their choice before the market closes on June 6th, 8:00 pm UTC. This action will allow holders to sell at the market price of their choice and, most important, prevent them from losing value on their holdings from the stock split event. For those addresses that are not able to swap in time, the Horizon Protocol DAO, through the multisig wallet, will perform a swap of any remaining zNVDA tokens into zUSD tokens. The conversion of remaining zNVDA will protect the zAsset portfolio value of any user who is unable to sell beforehand and is holding through the stock split. Additionally, as anticipated on HIP-3, this Horizon Improvement Proposal aims to provide transparency and predictability by establishing the implemented system as the standard for future similar events, in order to minimize disruption and to mitigate any potential risks.

Considerations

Additional thoughts we should take into consideration:

The conversion of any remaining zNVDA tokens into zUSD will be performed at the last price following the market close on June 6. Although this market price might not be the optimal trade, it will most likely result to be beneficial for holders ahead of the 10-to-1 split, and protect them from the impact on their C-Ratio in case they are staking HZN. After the conversion of zNVDA to zUSD, users affected by this event will no longer be holding zNVDA and their zAsset Portfolio will not be exposed to its price fluctuation.

Feedback & Questions

If you have any questions or concerns, please do not hesitate to reach out