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[Fireball]

Hello,
as the ICBIT trading volume grows, there is a need for more futures market liquidity. For example, the sell side of the order book is empty almost all the time, and whenever something appears there, it gets bought out within seconds.

The futures/spot contango on September futures is about $50, the June contango was just reduced by market makers (it was about $40). This is "free" money if you arbitrage between Mt.Gox and ICBIT (sell futures on ICBIT and buy BTC on MtGox).

However, to have bigger and more stable market, ICBIT is calling for market makers who jointly would provide buy and sell sides of the orderbook, thus making futures trading more fast, more thoroughly tracking the spot price movements.

We are ready to provide unique conditions: personal support from me (including help with the API, introducing changes to make the API better suit your needs, etc), fast connection to the server (special API server for market makers if the generic one is too busy) and of course very low (or even totally zero!) trading fees.

Please ask your questions here, and send your requests for market maker status to info@icbit.se

[Kato]

Fireball, the difficulty as I see it is that a market maker or arbitrager needs to have confidence that some or all of their positions will not be unexpectedly and forcibly closed to facilitate the liquidation of another trader, which has happened frequently. This would make it nearly impossible to manage and hedge risk in the book. You might argue this is chicken and egg. Maybe, but can you propose how market makers would be protected from this?

[Fireball]

Fireball, the difficulty as I see it is that a market maker or arbitrager needs to have confidence that some or all of their positions will not be unexpectedly and forcibly closed to facilitate the liquidation of another trader, which has happened frequently. This would make it nearly impossible to manage and hedge risk in the book. You might argue this is chicken and egg. Maybe, but can you propose how market makers would be protected from this?

That's why I'm proposing this. Market maker status would guarantee that their positions remain intact no matter what (however, they would still have to have maintenance margin, of course).

[random_cat]

If that is true, I fail to see how the situation is improved.   The market can still go lock limit which will render it bidless or askless and someone must bear the unwinding of the bankrupt accounts.

Is there to be another class of market participants who can inspect the net liquidation value of member accounts and bear (or mutualize)  the risk associated with unwinding the bankrupt positions?

Please enlighten me.

My own thinking is low or zero fees is insufficient reward for bearing an unseen, unmeasurable risk.  Under what conditions will the market maker be expected to maintain a two sided market?  What times of day? What other conditions will be necessary for maintaining whatever privilege is afforded the market maker?

[Fireball]

If that is true, I fail to see how the situation is improved.   The market can still go lock limit which will render it bidless or askless and someone must bear the unwinding of the bankrupt accounts.

Is there to be another class of market participants who can inspect the net liquidation value of member accounts and bear (or mutualize)  the risk associated with unwinding the bankrupt positions?

Please enlighten me.

My own thinking is low or zero fees is insufficient reward for bearing an unseen, unmeasurable risk.  Under what conditions will the market maker be expected to maintain a two sided market?  What times of day? What other conditions will be necessary for maintaining whatever privilege is afforded the market maker?

Enlighting, in a simplified explanation:

When one side of the order book is absent, proper risk management is very hard. When both sides of the orderbook are present, the traders who crosses the margin call requirements automatically have part of their position liquidated to reduce exposure to a risk of default.

Market makers' quote both sides of a contract, thus filling up the orderbook bids and asks, and allowing the exchange to perform risk management under normal conditions. Of course, market making may involve complex algorithms and hedging on the spot market.

[xeverse]

They did it in a very sophisticated way on the bitfloor.

Market makers (the ones who place limit orders) get a rebate
while market takers (market orders) pay the fee..

Although i have quit trading icbit for a while.
I just can't tame these wild non-linear risk profiles.

Suppose the price hits 1000, the fee for a hedging position
is gonna be up to 20%. What would you do then? Change the spec?

The futures are supposed to act as a neg feedback loop in the system,
here we have quite opposite, a sort of a positive feedback instead..

On the other hand the price of the hedging defines minimal fee rates
of the local exchangers, everyone of us, as p2p agents of the bitcoin mkt,
as eliminating the market risk is essential for them in the first place.

So what do we have. Fees keep rising all the time.
This doesn't help with the decentralization at all.
It seems very weird to me.

I don't see how can i use these futs for setting a small local exchange.
And that's precisely what we are supposed to do, as first of all
we need to get rid of the centralized financial institutions.

[Fireball]

Although i have quit trading icbit for a while.
I just can't tame these wild non-linear risk profiles.

There are rumours that we are going to launch linear futures soon . Would you be interested?

[random_cat]

Market makers' quote both sides of a contract, thus filling up the orderbook bids and asks, and allowing the exchange to perform risk management under normal conditions. Of course, market making may involve complex algorithms and hedging on the spot market.

Limit locked?  Yeah, right.

[johnblaze]

bitfloor does it correct

[xeverse]

Would you be interested?

I'm naturally interested in all financial derivative contracts.
My vision is a single p2p market which includes spot, fut and options.
Thanks for the news, Fire..

[asfbhero]

REBATES for adding liquidity.  The exchange that does this, is secure, and has a good API will become the biggest and most profitable exchange basically overnight.  Deep liquid order boks all the time, many more traders flocking to that exchange, the possibility of lowering fees overall because of extra $$ made by having so many more customers, etc. etc.

[Fireball]

REBATES for adding liquidity.  The exchange that does this, is secure, and has a good API will become the biggest and most profitable exchange basically overnight.  Deep liquid order boks all the time, many more traders flocking to that exchange, the possibility of lowering fees overall because of extra $$ made by having so many more customers, etc. etc.

It's not that easy, unfortunately. But we shall see.