Bitcoin Forum

Bitcoin => Project Development => Topic started by: Fireball on June 17, 2011, 09:09:00 PM

Title: Derivatives market - preferred client
Post by: Fireball on June 17, 2011, 09:09:00 PM
I'm developing a futures trading platform, and wanted to share thoughts and ask for opinions about the preferred client to use.

First of all, let's put a few words about what makes this "stock exchange" different from existing ones:
1. It's not a currency exchange service. BTC is one and only accepted currency to buy/sell futures contracts.
2. It's a derivative market nominated in BTC. All contracts are settled in cash (no physical delivery contracts, of course).
3. Margin trading possible.
4. Market maker exist, and others are welcome to participate in market making. This means the contracts will be liquid and often tradeable.
5. Suitable for speculative trading (margin trading makes it possible to profit more than on a usual currency exchange), aiming at thousands of trades per hour. This is good for helping establish a real BTC to other currencies ratio.
6. Suitable for hedging. Miners, etc could hedge the risk of BTC exchange ratio going down by means of a USD futures contract, for example.

Now a question which I'd like to discuss here. What client would you want to use in order to trade? Possible options with my comments:
1. Trade via web interface. The easiest way, but professional futures traders don't trade much via web interface. It's not fast enough, it's not usable enough. Usually it's done via a special client which allows to pick a price level, set an order and watch its execution almost instantly.
2. Trade using a special client (in addition to web-interface).
3. Use already existing client. Anyone trades in the US or Europe? What do you use for connecting your MTS?

I tihnk the most realistic option is to develop an opensource client for the exchange, which would have an open API for connecting mechanical trading systems, and also have an ability to export historic and real-time data to a Metastock compatible format so that most of the existing technical analysis software could be used.

Feel free to share your opinions.

Title: Re: Derivatives market - preferred client
Post by: Fireball on June 18, 2011, 09:23:14 AM
My own opinion is that building a minimal opensource client is the best one. It would allow easy connection of trading bots (say, via a COM API or something similar) and provide export of realtime/historic data in Metastock-compatible format (which nearly all technical analysis software accepts).

Having a look at the existing opensource charting software gives a rather pessimistic feeling about using them as a base. Chartsy, Merchant of Venice, look weird and not really usable, QTStalker seems to be mainly a Linux one (though QT is crossplatform, but there). jStock looks more or less good, but not directly usable too.

Title: Re: Derivatives market - preferred client
Post by: bitoption on June 18, 2011, 09:43:33 AM
My experience building bitoption is that BTC denominated caused many confusing headaches for people who wanted to actually trade in the system. Of course, options have multiple prices associated with them, so it's confusing.

Good luck!

Title: Re: Derivatives market - preferred client
Post by: Fireball on June 18, 2011, 10:06:32 AM
Thanks, yes I was looking at your system a few days ago, you did a good work creating one! :) I'm substantially more interested in futures contracts, because they are "simpler" for understanding and for trading than options.

Denomination in BTC, I think it should not be a big problem, and it's discussable according to how people want it.
Let's take an example from Russia, because Russian's currency is not USD: There is a futures contract on RTS index (the index is called RTSI, the futures is called RTx where x is the expiration date code).
RTSI is nominated in US dollars (1878.55 was the last closing value). RTx also nominates in points (e.g. last trade of 9.11 futures was executed at 184830, which corresponds to expectation of this index at 1848.30 at 9/2011).
Now the fun part is that margin variance and contract settlement and all related calculations are performed in Russian Rubles. So that if I want to buy 1 RTx contract at 184830, this will be US $3685 total value, and initial margin US$ 296. Paid in Rubles, the exchange ratio is being adjust two times per day at predefined time interval.
Millions of people trade it this way in Russia and have no problems ;). It even makes it more interesting for arbitrage traders because the USD/RUB ratio comes into consideration.

Title: Re: Derivatives market - preferred client
Post by: bitoption on June 18, 2011, 10:22:22 AM
Yep, I totally get the motivation. If I didn't say it before, good luck!