Pendle Limit Order

Summary:

• Limit orders allow users to place buy/sell orders for PT and YT at a specific Implied APY
• Swaps can be matched and filled partially or completely through limit orders via the most optimal route after taking swap and gas fees into account
• As a result, the Pendle yield market can now function much more efficiently and cost-effectively
• Limit orders are only available on Arbitrum now, and will be supported on other chains soon
• Trade to Earn! Successfully filled Limit Orders let you earn a portion of the weekly ARB rewards for each pool, based on your filled volume

Never miss a trade on Pendle again!

Need a good night’s sleep after a long day of hard work?

How about a run to the grocery store for some emergency ramen?

Or catch up on that anime that you’ve missed in the past 6 months?

All the things you haven’t been able to do because of that big, dark shadow of FOMO on your mind.

That’s all about to change now, Pendies.

With just the click of a button, you can now place Limit Orders on Pendle and live life FOMO-free.

To start, Pendle Limit Order will only be available on Arbitrum for the following pools, with planned expansions to other markets and chains in the future:

• aUSDC
• wstETH (Mar 2024)
• GLP
• rETH
• gDAI

What’s a Limit Order

First, the basics!

When you place a limit order, you are giving instructions to buy or sell tokens when and only when the price is right.

A buy limit order for instance lets you place a request to buy the token when it falls below a certain price — the so-called limit price. With a sell limit order, your tokens will only be sold once they rise above a set limit price.

Example:

Let’s say you want to buy ETH. If you place a limit order to buy $10,000 worth of ETH at $1,800, the order will only be filled if the price of ETH falls to $1,800 or less.

If the token doesn’t reach the limit price you specify by the end of the designated time frame, the limit order will be automatically cancelled.

Limit Order on Pendle

Limit orders work in a similar fashion on Pendle, tailored to fit for yield trading.

Users can now place a limit order for PT and YT at a certain Implied APY. The limit order will be executed when the Implied APY matches with the order.

Example:

A buy order of 5 wstETH for YT-wstETH at 3.4% Implied APY means that the order will execute only when the AMM’s Implied APY of wstETH drops to or below 3.4%.

Limit orders are automatically matched against opposite market or limit orders.

Why would you do this?

• Expect ETH staking yield to maintain above 3.4% APY, but current cost of 3.625% Implied APY is too high
• Catch the dip (if any)
• Get your order filled at precisely the price you’re comfortable with (or lower)

In contrast, market orders incur price impact which result in:

• Lower than expected output of YT
• Higher than expected cost of acquisition (higher effective Implied APY)

With Limit Order, you’ll be able to ensure your average cost of acquisition for YT-wstETH remains constant at 3.4% Implied APY, with zero price impact on the market.

How to Place a Limit Order

1. Click on the <Limit> tab on the market page
2. Key in the amount of input tokens. Do note that only underlying assets are accepted for limit orders. For YT-gDAI like the example shown, this would be DAI, gDAI or SY-gDAI.
3. Don’t have the required input tokens? Click on “Get input tokens” to swap for them!
4. Key in your desired Implied APY to buy YT at and select expiry from the drop down
5. Once you’re ready, click on Approve gDAI and confirm!
6. Your order will automatically be filled once the set limit price is hit. You can check on the progress of your order, including how much of it has been filled on the dashboard.
7. Changed your mind? Cancel your order from the same dashboard by clicking on the red bin icon.
8. The process for Sell Limit Orders works similarly. Simply click on the <Sell> tab above and repeat the steps.

Under “Fill Status”, orders can be:

• Executed (Order is filled)
• Expired (Order is not filled by its expiry)
• Invalid

Limit orders are deemed “invalid” when:

1. The balance of asset in your wallet falls below the order amount
2. The allowance set from your address is less than the order amount

How Limit Orders Work on Pendle

You’ve already learnt about how Limit Orders are filled only at the set Implied APY within a predetermined time frame — but what happens at the back of the kitchen?

Let’s use YT-wstETH as an example again.

A 5 wstETH Buy Limit Order for YT-wstETH at Implied APY of 3.4% can be filled when the order matches with a countertrade from other orders.

As an example, there are 4 ways that a Buy Limit Order for YT-wstETH can be matched and filled:

1. Sell Limit Order for YT-wstETH
2. Market sell for YT-wstETH
3. Buy Limit Order for PT-wstETH
4. Market buy for PT-wstETH

The order will be filled based on the most gas-optimal route for both parties via one or more of these 4 ways until the entire limit order is filled or expires.

In a similar vein, a Sell Limit Order for YT-GLP can also be matched and filled 4-ways:

1. Buy Limit Order for YT-wstETH
2. Market buy for YT-wstETH
3. Sell Limit Order for PT-wstETH
4. Market sell for PT-wstETH

Things to note:

• Limit orders can only be opened using Underlying Assets (e.g. GLP for YT-GLP, gDAI for YT-gDAI)
• Orders are filled at a predetermined Implied APY, but output of YT for this may vary.

For example,

Day 1: 1 ETH Limit Order at 3.4% Implied APY filled for 152 YT-wstETH

Day 10: 1 ETH Limit Order at 3.4% Implied APY Filled for 200 YT-GLP

This is because the price of YT decreases overtime as yield is collected by the owners and discounted from the total price. To learn more about the price relationship of PT and YT, you can check out Pendle Academy.

Trade to Earn — Maker Order ARB Campaign!

Good news — the holidays may be over but it’s still Arbitrum Season on Pendle. Which also means, you can now earn even more ARB by simply using our new Limit Order function.

To qualify, create a Limit Order for any of the supported pools. Then simply kickback, and wait for them to be filled.

Filled orders will split a weekly fixed pot of rewards for each pool based on your filled volume.

With this, you can now earn TRIPLE ARB rewards from the selected pools, including:

1. ARB incentives for Pendle LPs
2. 120% of Swap Fees paid as ARB for yield traders
3. Maker Order ARB incentives for Limit Order users 🔥

How This Benefits the Pendle Yield Market

Since limit orders are ready to be filled at specific Implied APY, this also means that limit orders help deepen liquidity at that specific Implied APY. Any swaps and limit orders will be filled through other limit orders first before the AMM is utilized, minimizing or even avoiding any price impact on the AMM’s Implied APY.

In a sense, swaps and orders can now be filled beyond just the liquidity in the pool. Thanks to this, yield trades can now be much more efficient and cost-effective, even for swaps made directly through the AMM.

Conclusion

Limit order is an exciting development for Pendle that will greatly improve and transform on-chain yield trading. This has been one of the most requested features by our partners and community, and will lay the groundwork for Pendle to attract even more institutional clients.

If you have any questions or feedback, pop by our Discord and let us know! We always love to hear from our community.