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fix: enforce non-decreasing settlement fees #968

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fix: enforce non-decreasing settlement fees #968

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49c532a
fix: enforce non-decreasing settlement fees
prd-carapulse[bot] Jun 2, 2026
355e70d
refactor: check adjacent fee breakpoints
prd-carapulse[bot] Jun 2, 2026
644a829
refactor: inline fee monotonicity checks
prd-carapulse[bot] Jun 2, 2026
3f311c7
refactor: use settlement fee getter
prd-carapulse[bot] Jun 2, 2026
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12 changes: 10 additions & 2 deletions src/Midnight.sol
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Expand Up @@ -42,6 +42,7 @@ import {IMidnight, Market, Offer, CollateralParams, MarketState, Position} from
/// @dev The settlement fee is a piecewise linear function on the TTM (time to maturity). It is computed with linear
/// approximation between breakpoints.
/// @dev Settlement fee breakpoint indices: 0=0d, 1=1d, 2=7d, 3=30d, 4=90d, 5=180d, 6=360d.
/// @dev Settlement fees are non-decreasing with the TTM.
/// @dev For TTM > 360d, the settlement fee is the fee at the 360d breakpoint.
/// @dev Post-maturity, the settlement fee is the fee at the 0d breakpoint.
/// @dev Settlement fees are stored in cbp (centi-basis-points): settlementFee / CBP.
Expand Down Expand Up @@ -264,6 +265,9 @@ contract Midnight is IMidnight {
require(_marketState.tickSpacing > 0, MarketNotCreated());
// forge-lint: disable-next-item(unsafe-typecast) as newSettlementFee <= maxSettlementFee <= uint16.max * CBP
uint16 newSettlementFeeCbp = uint16(newSettlementFee / CBP);
uint16[7] memory feeCbps = settlementFeeCbps(id);
require(index == 0 || feeCbps[index - 1] <= newSettlementFeeCbp, SettlementFeeNotMonotonic());
require(index == 6 || newSettlementFeeCbp <= feeCbps[index + 1], SettlementFeeNotMonotonic());
if (index == 0) _marketState.settlementFeeCbp0 = newSettlementFeeCbp;
else if (index == 1) _marketState.settlementFeeCbp1 = newSettlementFeeCbp;
else if (index == 2) _marketState.settlementFeeCbp2 = newSettlementFeeCbp;
Expand All @@ -280,7 +284,11 @@ contract Midnight is IMidnight {
require(newSettlementFee <= maxSettlementFee(index), SettlementFeeTooHigh());
require(newSettlementFee % CBP == 0, FeeNotMultipleOfFeeCbp());
// forge-lint: disable-next-item(unsafe-typecast) as newSettlementFee <= maxSettlementFee <= uint16.max * CBP
defaultSettlementFeeCbp[loanToken][index] = uint16(newSettlementFee / CBP);
uint16 newSettlementFeeCbp = uint16(newSettlementFee / CBP);
uint16[7] storage feeCbps = defaultSettlementFeeCbp[loanToken];
require(index == 0 || feeCbps[index - 1] <= newSettlementFeeCbp, SettlementFeeNotMonotonic());
require(index == 6 || newSettlementFeeCbp <= feeCbps[index + 1], SettlementFeeNotMonotonic());
feeCbps[index] = newSettlementFeeCbp;
emit EventsLib.SetDefaultSettlementFee(loanToken, index, newSettlementFee);
}

Expand Down Expand Up @@ -905,7 +913,7 @@ contract Midnight is IMidnight {
}

/// @dev The settlement fee cbp values are 0 until the market is created, then set to the default value.
function settlementFeeCbps(bytes32 id) external view returns (uint16[7] memory) {
function settlementFeeCbps(bytes32 id) public view returns (uint16[7] memory) {
return [
marketState[id].settlementFeeCbp0,
marketState[id].settlementFeeCbp1,
Expand Down
1 change: 1 addition & 0 deletions src/interfaces/IMidnight.sol
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Expand Up @@ -96,6 +96,7 @@ interface IMidnight {
error OfferNotStarted();
error OnlyFeeClaimer();
error OnlyFeeSetter();
error SettlementFeeNotMonotonic();
error OnlyRoleSetter();
error OnlyTickSpacingSetter();
error RatifierFail();
Expand Down
3 changes: 2 additions & 1 deletion test/MidnightBundlesTest.sol
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Expand Up @@ -41,8 +41,9 @@ contract MidnightBundlesTest is BaseTest {

// Set settlement fees to max for all breakpoints.
midnight.setFeeClaimer(makeAddr("feeClaimer"));
for (uint256 i; i <= 6; i++) {
for (uint256 i = 6;; --i) {
midnight.setDefaultSettlementFee(address(loanToken), i, maxSettlementFee(i));
if (i == 0) break;
}

market.loanToken = address(loanToken);
Expand Down
6 changes: 4 additions & 2 deletions test/OtherFunctionsTest.sol
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Expand Up @@ -233,8 +233,9 @@ contract OtherFunctionsTest is BaseTest {
_market = validMarket(_market);

midnight.setDefaultContinuousFee(_market.loanToken, MAX_CONTINUOUS_FEE);
for (uint256 i = 0; i < 7; i++) {
for (uint256 i = 6;; --i) {
midnight.setDefaultSettlementFee(_market.loanToken, i, maxSettlementFee(i));
if (i == 0) break;
}

bytes32 _id = midnight.touchMarket(_market);
Expand Down Expand Up @@ -637,8 +638,9 @@ contract OtherFunctionsTest is BaseTest {
_defaultContinuousFee = bound(_defaultContinuousFee, 0, MAX_CONTINUOUS_FEE);

midnight.setDefaultContinuousFee(_market.loanToken, _defaultContinuousFee);
for (uint256 i = 0; i < 7; i++) {
for (uint256 i = 6;; --i) {
midnight.setDefaultSettlementFee(_market.loanToken, i, maxSettlementFee(i));
if (i == 0) break;
}

bytes32 _id = midnight.touchMarket(_market);
Expand Down
108 changes: 78 additions & 30 deletions test/SettersTest.sol
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Expand Up @@ -16,6 +16,23 @@ import {BaseTest} from "./BaseTest.sol";
import {IMidnight, Market, CollateralParams} from "../src/interfaces/IMidnight.sol";

contract SettersTest is BaseTest {
function _createMarket(address loanToken_) internal returns (bytes32) {
CollateralParams[] memory collateralParams = new CollateralParams[](1);
collateralParams[0] = CollateralParams({
token: address(collateralToken1), lltv: 0.77e18, maxLif: maxLif(0.77e18, 0.25e18), oracle: address(oracle1)
});
Market memory market = Market({
loanToken: loanToken_,
maturity: vm.getBlockTimestamp() + 1 days,
collateralParams: collateralParams,
rcfThreshold: 0,
enterGate: address(0),
liquidatorGate: address(0)
});
midnight.touchMarket(market);
return toId(market);
}

function testMaxSettlementFeeConstants() public pure {
assertEq(maxSettlementFee(0), MAX_SETTLEMENT_FEE_0_DAYS, "0 days max settlement fee");
assertEq(maxSettlementFee(1), MAX_SETTLEMENT_FEE_1_DAY, "1 day max settlement fee");
Expand Down Expand Up @@ -65,12 +82,12 @@ contract SettersTest is BaseTest {
uint256 threeSixtyDaysFee
) public {
postMaturityFee = bound(postMaturityFee, 0, maxSettlementFee(0)) / 1e12 * 1e12;
oneDayFee = bound(oneDayFee, 0, maxSettlementFee(1)) / 1e12 * 1e12;
sevenDaysFee = bound(sevenDaysFee, 0, maxSettlementFee(2)) / 1e12 * 1e12;
thirtyDaysFee = bound(thirtyDaysFee, 0, maxSettlementFee(3)) / 1e12 * 1e12;
ninetyDaysFee = bound(ninetyDaysFee, 0, maxSettlementFee(4)) / 1e12 * 1e12;
oneEightyDaysFee = bound(oneEightyDaysFee, 0, maxSettlementFee(5)) / 1e12 * 1e12;
threeSixtyDaysFee = bound(threeSixtyDaysFee, 0, maxSettlementFee(6)) / 1e12 * 1e12;
oneDayFee = bound(oneDayFee, postMaturityFee, maxSettlementFee(1)) / 1e12 * 1e12;
sevenDaysFee = bound(sevenDaysFee, oneDayFee, maxSettlementFee(2)) / 1e12 * 1e12;
thirtyDaysFee = bound(thirtyDaysFee, sevenDaysFee, maxSettlementFee(3)) / 1e12 * 1e12;
ninetyDaysFee = bound(ninetyDaysFee, thirtyDaysFee, maxSettlementFee(4)) / 1e12 * 1e12;
oneEightyDaysFee = bound(oneEightyDaysFee, ninetyDaysFee, maxSettlementFee(5)) / 1e12 * 1e12;
threeSixtyDaysFee = bound(threeSixtyDaysFee, oneEightyDaysFee, maxSettlementFee(6)) / 1e12 * 1e12;

CollateralParams[] memory collateralParams = new CollateralParams[](1);
collateralParams[0] = CollateralParams({
Expand All @@ -87,13 +104,13 @@ contract SettersTest is BaseTest {
bytes32 id = toId(market);
midnight.touchMarket(market);

midnight.setMarketSettlementFee(id, 0, postMaturityFee);
midnight.setMarketSettlementFee(id, 1, oneDayFee);
midnight.setMarketSettlementFee(id, 2, sevenDaysFee);
midnight.setMarketSettlementFee(id, 3, thirtyDaysFee);
midnight.setMarketSettlementFee(id, 4, ninetyDaysFee);
midnight.setMarketSettlementFee(id, 5, oneEightyDaysFee);
midnight.setMarketSettlementFee(id, 6, threeSixtyDaysFee);
midnight.setMarketSettlementFee(id, 5, oneEightyDaysFee);
midnight.setMarketSettlementFee(id, 4, ninetyDaysFee);
midnight.setMarketSettlementFee(id, 3, thirtyDaysFee);
midnight.setMarketSettlementFee(id, 2, sevenDaysFee);
midnight.setMarketSettlementFee(id, 1, oneDayFee);
midnight.setMarketSettlementFee(id, 0, postMaturityFee);

assertEq(midnight.settlementFee(id, 0), postMaturityFee, "post maturity settlement fee");
assertEq(midnight.settlementFee(id, 1 days), oneDayFee, "one day settlement fee");
Expand Down Expand Up @@ -139,6 +156,37 @@ contract SettersTest is BaseTest {
midnight.setDefaultSettlementFee(loanToken, index, fee);
}

function testSetMarketSettlementFeeRejectsDecreaseWithLongerTtm() public {
bytes32 id = _createMarket(address(loanToken));

vm.expectRevert(IMidnight.SettlementFeeNotMonotonic.selector);
midnight.setMarketSettlementFee(id, 1, 1e12);
}

function testSetMarketSettlementFeeRejectsDecreaseWithShorterTtm() public {
bytes32 id = _createMarket(address(loanToken));
midnight.setMarketSettlementFee(id, 6, 3e12);
midnight.setMarketSettlementFee(id, 5, 2e12);
midnight.setMarketSettlementFee(id, 4, 1e12);

vm.expectRevert(IMidnight.SettlementFeeNotMonotonic.selector);
midnight.setMarketSettlementFee(id, 5, 0);
}

function testSetDefaultSettlementFeeRejectsDecreaseWithLongerTtm() public {
vm.expectRevert(IMidnight.SettlementFeeNotMonotonic.selector);
midnight.setDefaultSettlementFee(address(loanToken), 1, 1e12);
}

function testSetDefaultSettlementFeeRejectsDecreaseWithShorterTtm() public {
midnight.setDefaultSettlementFee(address(loanToken), 6, 3e12);
midnight.setDefaultSettlementFee(address(loanToken), 5, 2e12);
midnight.setDefaultSettlementFee(address(loanToken), 4, 1e12);

vm.expectRevert(IMidnight.SettlementFeeNotMonotonic.selector);
midnight.setDefaultSettlementFee(address(loanToken), 5, 0);
}

function testSetMarketSettlementFeeMarketNotCreated(bytes32 id) public {
vm.expectRevert(IMidnight.MarketNotCreated.selector);
midnight.setMarketSettlementFee(id, 0, 0);
Expand Down Expand Up @@ -194,13 +242,13 @@ contract SettersTest is BaseTest {
oneEightyDaysFee = bound(oneEightyDaysFee, ninetyDaysFee, maxSettlementFee(5)) / 1e12 * 1e12;
threeSixtyDaysFee = bound(threeSixtyDaysFee, oneEightyDaysFee, maxSettlementFee(6)) / 1e12 * 1e12;

midnight.setDefaultSettlementFee(loanToken, 0, postMaturityFee);
midnight.setDefaultSettlementFee(loanToken, 1, oneDayFee);
midnight.setDefaultSettlementFee(loanToken, 2, sevenDaysFee);
midnight.setDefaultSettlementFee(loanToken, 3, thirtyDaysFee);
midnight.setDefaultSettlementFee(loanToken, 4, ninetyDaysFee);
midnight.setDefaultSettlementFee(loanToken, 5, oneEightyDaysFee);
midnight.setDefaultSettlementFee(loanToken, 6, threeSixtyDaysFee);
midnight.setDefaultSettlementFee(loanToken, 5, oneEightyDaysFee);
midnight.setDefaultSettlementFee(loanToken, 4, ninetyDaysFee);
midnight.setDefaultSettlementFee(loanToken, 3, thirtyDaysFee);
midnight.setDefaultSettlementFee(loanToken, 2, sevenDaysFee);
midnight.setDefaultSettlementFee(loanToken, 1, oneDayFee);
midnight.setDefaultSettlementFee(loanToken, 0, postMaturityFee);

// touch market with this loan token
CollateralParams[] memory collateralParams = new CollateralParams[](1);
Expand Down Expand Up @@ -253,12 +301,12 @@ contract SettersTest is BaseTest {
uint256 settlementFee6
) public {
settlementFee0 = bound(settlementFee0, 0, maxSettlementFee(0)) / 1e12 * 1e12;
settlementFee1 = bound(settlementFee1, 0, maxSettlementFee(1)) / 1e12 * 1e12;
settlementFee2 = bound(settlementFee2, 0, maxSettlementFee(2)) / 1e12 * 1e12;
settlementFee3 = bound(settlementFee3, 0, maxSettlementFee(3)) / 1e12 * 1e12;
settlementFee4 = bound(settlementFee4, 0, maxSettlementFee(4)) / 1e12 * 1e12;
settlementFee5 = bound(settlementFee5, 0, maxSettlementFee(5)) / 1e12 * 1e12;
settlementFee6 = bound(settlementFee6, 0, maxSettlementFee(6)) / 1e12 * 1e12;
settlementFee1 = bound(settlementFee1, settlementFee0, maxSettlementFee(1)) / 1e12 * 1e12;
settlementFee2 = bound(settlementFee2, settlementFee1, maxSettlementFee(2)) / 1e12 * 1e12;
settlementFee3 = bound(settlementFee3, settlementFee2, maxSettlementFee(3)) / 1e12 * 1e12;
settlementFee4 = bound(settlementFee4, settlementFee3, maxSettlementFee(4)) / 1e12 * 1e12;
settlementFee5 = bound(settlementFee5, settlementFee4, maxSettlementFee(5)) / 1e12 * 1e12;
settlementFee6 = bound(settlementFee6, settlementFee5, maxSettlementFee(6)) / 1e12 * 1e12;

CollateralParams[] memory cols = new CollateralParams[](1);
cols[0] = CollateralParams({
Expand All @@ -275,13 +323,13 @@ contract SettersTest is BaseTest {
bytes32 id = toId(market);
midnight.touchMarket(market);

midnight.setMarketSettlementFee(id, 0, settlementFee0);
midnight.setMarketSettlementFee(id, 1, settlementFee1);
midnight.setMarketSettlementFee(id, 2, settlementFee2);
midnight.setMarketSettlementFee(id, 3, settlementFee3);
midnight.setMarketSettlementFee(id, 4, settlementFee4);
midnight.setMarketSettlementFee(id, 5, settlementFee5);
midnight.setMarketSettlementFee(id, 6, settlementFee6);
midnight.setMarketSettlementFee(id, 5, settlementFee5);
midnight.setMarketSettlementFee(id, 4, settlementFee4);
midnight.setMarketSettlementFee(id, 3, settlementFee3);
midnight.setMarketSettlementFee(id, 2, settlementFee2);
midnight.setMarketSettlementFee(id, 1, settlementFee1);
midnight.setMarketSettlementFee(id, 0, settlementFee0);

// Test exact breakpoints
assertEq(midnight.settlementFee(id, 0), settlementFee0, "0 days");
Expand Down
23 changes: 15 additions & 8 deletions test/SettlementFeeTest.sol
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Expand Up @@ -31,6 +31,13 @@ contract SettlementFeeTest is BaseTest {
Offer internal borrowerOffer;
address internal feeClaimer = makeAddr("feeClaimer");

function _setDefaultSettlementFeeFrom(uint256 index, uint256 settlementFee) internal {
for (uint256 i = 6;; --i) {
midnight.setDefaultSettlementFee(address(loanToken), i, settlementFee);
if (i == index) break;
}
}

function setUp() public override {
super.setUp();

Expand Down Expand Up @@ -87,7 +94,7 @@ contract SettlementFeeTest is BaseTest {
uint256 sellerPrice = TickLib.tickToPrice(sellerTick);
vm.assume(sellerPrice >= MIN_SELLER_PRICE);
settlementFee = bound(settlementFee, 0, maxSettlementFee(1)) / 1e12 * 1e12;
midnight.setDefaultSettlementFee(address(loanToken), 1, settlementFee);
_setDefaultSettlementFeeFrom(1, settlementFee);
midnight.touchMarket(market);
midnight.setMarketTickSpacing(id, 1);
borrowerOffer.tick = sellerTick;
Expand All @@ -112,7 +119,7 @@ contract SettlementFeeTest is BaseTest {
uint256 buyerPrice = TickLib.tickToPrice(buyerTick);
vm.assume(buyerPrice >= MIN_SELLER_PRICE);
settlementFee = bound(settlementFee, 0, maxSettlementFee(1)) / 1e12 * 1e12;
midnight.setDefaultSettlementFee(address(loanToken), 1, settlementFee);
_setDefaultSettlementFeeFrom(1, settlementFee);
lenderOffer.tick = buyerTick;

uint256 sellerPrice = buyerPrice - settlementFee;
Expand All @@ -134,7 +141,7 @@ contract SettlementFeeTest is BaseTest {
uint256 sellerPrice = TickLib.tickToPrice(sellerTick);
vm.assume(sellerPrice >= MIN_SELLER_PRICE);
settlementFee = bound(settlementFee, 0, maxSettlementFee(1)) / 1e12 * 1e12;
midnight.setDefaultSettlementFee(address(loanToken), 1, settlementFee);
_setDefaultSettlementFeeFrom(1, settlementFee);
borrowerOffer.tick = sellerTick;

uint256 buyerPrice = sellerPrice + settlementFee;
Expand Down Expand Up @@ -168,8 +175,8 @@ contract SettlementFeeTest is BaseTest {

// Set fees at breakpoints for linear interpolation (3 days is between 1 and 7 days)
// Must be set before touchMarket, which snapshots defaultFees at creation time.
_setDefaultSettlementFeeFrom(2, settlementFee7Days);
midnight.setDefaultSettlementFee(address(loanToken), 1, settlementFee1Day);
midnight.setDefaultSettlementFee(address(loanToken), 2, settlementFee7Days);

id = midnight.touchMarket(market);
lenderOffer.market = market;
Expand Down Expand Up @@ -209,7 +216,7 @@ contract SettlementFeeTest is BaseTest {
lenderOffer.market = market;
borrowerOffer.market = market;

midnight.setDefaultSettlementFee(address(loanToken), 0, settlementFee0Day);
_setDefaultSettlementFeeFrom(0, settlementFee0Day);
borrowerOffer.tick = sellerTick;

collateralize(market, borrower, MAX_DEBT);
Expand Down Expand Up @@ -255,7 +262,7 @@ contract SettlementFeeTest is BaseTest {
function testClaimSettlementFee(uint256 settlementFee, uint256 units, uint256 withdrawAmount) public {
units = bound(units, 1, MAX_DEBT);
settlementFee = bound(settlementFee, 1e12, maxSettlementFee(1)) / 1e12 * 1e12;
midnight.setDefaultSettlementFee(address(loanToken), 1, settlementFee);
_setDefaultSettlementFeeFrom(1, settlementFee);

collateralize(market, borrower, MAX_DEBT);
take(units, lender, borrowerOffer);
Expand All @@ -281,7 +288,7 @@ contract SettlementFeeTest is BaseTest {

function testClaimSettlementFeeExcessReverts() public {
uint256 settlementFee = maxSettlementFee(1) / 1e12 * 1e12;
midnight.setDefaultSettlementFee(address(loanToken), 1, settlementFee);
_setDefaultSettlementFeeFrom(1, settlementFee);
borrowerOffer.tick = 0;

collateralize(market, borrower, MAX_DEBT);
Expand All @@ -296,7 +303,7 @@ contract SettlementFeeTest is BaseTest {

function testSettlementFeesAccumulate() public {
uint256 settlementFee = maxSettlementFee(1) / 1e12 * 1e12;
midnight.setDefaultSettlementFee(address(loanToken), 1, settlementFee);
_setDefaultSettlementFeeFrom(1, settlementFee);
borrowerOffer.tick = 0;
borrowerOffer.group = keccak256("g1");

Expand Down
7 changes: 5 additions & 2 deletions test/TakeAmountsTest.sol
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Expand Up @@ -59,10 +59,13 @@ contract TakeAmountsTest is BaseTest {
returns (uint256 settlementFee)
{
settlementFee0 = bound(settlementFee0, 0, maxSettlementFee(0)) / 1e12 * 1e12;
settlementFee1 = bound(settlementFee1, 0, maxSettlementFee(1)) / 1e12 * 1e12;
settlementFee1 = bound(settlementFee1, settlementFee0, maxSettlementFee(1)) / 1e12 * 1e12;
midnight.touchMarket(market);
for (uint256 i = 6;; --i) {
midnight.setMarketSettlementFee(id, i, settlementFee1);
if (i == 1) break;
}
midnight.setMarketSettlementFee(id, 0, settlementFee0);
midnight.setMarketSettlementFee(id, 1, settlementFee1);
settlementFee = midnight.settlementFee(id, market.maturity - vm.getBlockTimestamp());
}

Expand Down
10 changes: 8 additions & 2 deletions test/TakeTest.sol
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Expand Up @@ -1223,7 +1223,10 @@ contract TakeTest is BaseTest {
// fee>0, buy, units
function testPriceZeroWithSettlementFeeBuy() public {
midnight.touchMarket(market);
midnight.setMarketSettlementFee(id, 1, 1e12);
for (uint256 i = 6;; --i) {
midnight.setMarketSettlementFee(id, i, 1e12);
if (i == 1) break;
}
uint256 units = 1e18;
lenderOffer.tick = 0;
lenderOffer.maxUnits = units;
Expand All @@ -1235,7 +1238,10 @@ contract TakeTest is BaseTest {
// fee>0, sell, units
function testPriceZeroWithSettlementFeeSell() public {
midnight.touchMarket(market);
midnight.setMarketSettlementFee(id, 1, 1e12);
for (uint256 i = 6;; --i) {
midnight.setMarketSettlementFee(id, i, 1e12);
if (i == 1) break;
}
uint256 fee = midnight.settlementFee(id, market.maturity - vm.getBlockTimestamp());
uint256 units = 1e18;
borrowerOffer.tick = 0;
Expand Down
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