How do I represent a tokenized capital commitment that can be drawn-down by an issuer?

Questions
1

In Daml finance, I want to create a token that represents the commitment of $1 from the owner to the issuer, which the issuer may call on in the future. These calls will happen at the instrument level, on a pro-rata basis. E.g.:

I issue 100 of this token, which I sell to 3 investors:

  • Alpha: 40
  • Beta: 27
  • Gamma: 33

And let’s say tomorrow, the issuer, on their whim, calls $20. This should:

  • Debit Alpha $8.00;
  • Debit Beta $5.40
  • Debit Gamma $6.60
  • Credit Issuer $20.00
    AND it should somehow change the token to reflect that 20% has been called.

What is the best place to store this available/used %? Some ideas:

1. Store the Available pct in the claim

So define the token as `Give $ Anytime afterToday $ Scale (Const 1.00) (One usd)’ and create an event that partially exercises this. E.g. in the above example, 1.00 → 0.80 (in a replacement) and $20 is transferred from the owners to the issuer during the Effect.

2. Store the Available pct as an Observation

3. Store the Available pct in a separate contract

…and associate this contract with a simple Token. Then capital calls sorta happen “outside” Daml finance.

Thanks!
Levente

2

Hi @Levente_Barczy,

This kind of commitment is quite hard to model in the contingent claims framework, as

  • the choice is not binary (it depends on an amount that can be chosen)
  • the commitment is highly recursive (you can call it a very large number of times by e.g. calling for $0.01 each time)

That said, two options come to mind:

Option 1 (using Daml Finance contracts entirely):

  • Define the token as Give $ Anytime afterToday $ One usd.
  • In order to claim the $20, the issuer shall
    • split Alpha’s holding into a holding for an amount of 8 and a holding for an amount of 32
    • use the first holding to create an election for an amount of 8
    • use the election to lifecycle the instrument and generate effects. The effect will consume the holding and transfer 8 USD to the issuer.
    • use the first holding to claim and settle the effects
    • repeat the process for beta and gamma

After this process, the investors will be left with the holding on the remaining amount, whereas the issuer has received the $20.

Option 2 (using a custom instrument)

  • You can define a custom instrument template where you explicitly state the remaining amount (initially 1.0)
  • You define a custom lifecycle rule where the issuer enter an arbitrary amount and
    • create a new version of the instrument with the remaining amount (say 0.8)
    • create an effect to consume the initial instrument, produce the new instrument, pay $0.2 to the issuer
    • claim and settle effects as usual, using the Daml Finance machinery

I hope this helps!
Matteo

3

You can have a look at the Callable bond example to understand how the mechanics of option 1 works.

4

Thanks, @Matteo_Limberto. One requirement I neglected to mention is that I do not want to split the holdings when the capital call happens. Like I still need to drop dividends on the token itself, i.e. even after the $20 call, I want to drop the dividend to alpha, beta, and gamma based on the original 40-27-33 basis.

So your option 2 looks appealing; is there an example of this? Would it be similar to the tokenized fund in the sample app? (There’s a simple token, but there’s a Fund template that stores some data alongside the token.)

5

The closest we have as an example and a good starting point would be the Equity instrument and the corresponding lifecycle rule to distribute dividends.

What you are trying to model is basically a “reverse dividend”, so I would suggest to

  • start from the equity instrument and add a field for the remaining amount
  • start from the Distribution rule and make it “reversed” so that the “dividend” is paid by the holding owner

Matteo

6

Thanks @Matteo_Limberto, that’s very helpful! So to be precise:

  1. I’ll create a custom Implementation of the Equity interface, with exactly the same choices as the Equity Instrument you allude to above.
  2. But the instrument will have a new field to represent the stuff I need for the capital calls (currency, uncalled amount, called amount).
  3. The instrument will also have a new choice, declareCapitalCall, which as you point out will work exactly as a reverse dividend, except that it will modify the fields mentioned in 2. I like the idea of “giving” a a dividend that is a compulsion to pay.
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