What's wrong with Kraken?

[becoin]

What's wrong with their margin trading fees?

They've started their margin trading with 0.05% rollover fees per day for both long and short positions. Today they informed me there are changes effective immediately. XBT/EUR rollover fee for maintaining a position is now 0.01% per 4 hours. Aside from the fact that fees are outrageously high, it is for the first time I see charging rollover fees per hour. Is rollover fees per hour a common practice among bitcoin exchanges? What's next - rollover fees per minute?

[Amph]

it has to do with the falling in price of bitcoin, probably, many exchange are out of money if bitcoin crash too much, because it mean also less trade, people just dump and forget if they are weak hands, otherwise you will get those occasional users that manipulate the price

few bots playing against themselves can't sustain all those exchange with a good volume

[becoin]

because it mean also less trade

Well, how will you convince your customers to trade more if you increase your trading fees and charges?

---

0.01% per 4 hours = 0.06% per day
0.06 x 365 = 21.9% per annum
Greed!

Charge 21.9% per annum BTC/EUR longs
+
Charge 21.9% per annum BTC/EUR shorts
===
Makes 43.8% interest rate differential between longs and shorts
Greed^2!

Is Kraken the greediest exchange among all bitcoin exchanges?

---

Greed can explain many things but not everything!

Are BTC and EUR financing both equally available? Not at all. EUR funds are much easier to find at nearly zero interest rate while BTC funding is more difficult to secure, especially long term, resulting in considerably higher interest rate. Applying same rollover fees for both longs and shorts means you stimulate BTC/EUR shorts and punish BTC/EUR longs.

Why would a bitcoin exchange side with bitcoin enemies?

[Serpens66]

just ask it in the official Kraken thread and I'm sure Dargo will answer

[becoin]

just ask it in the official Kraken thread and I'm sure Dargo will answer

I can see Dargo discussing many Kraken-related questions but can't find the "official" Kraken thread?

[Amph]

because it mean also less trade

Well, how will you convince your customers to trade more if you increase your trading fees and charges?

i think they can't aim at increase the users base for now, so they decided to milk more from their remaining user base, if you see that your income isn't rising in the last few month, the only solution is to increase the fee, like they have done right now

[Mickeyb]

because it mean also less trade

Well, how will you convince your customers to trade more if you increase your trading fees and charges?

---

0.01% per 4 hours = 0.06% per day
0.06 x 365 = 21.9% per annum
Greed!

Charge 21.9% per annum BTC/EUR longs
+
Charge 21.9% per annum BTC/EUR shorts
===
Makes 43.8% interest rate differential between longs and shorts
Greed^2!

Is Kraken the greediest exchange among all bitcoin exchanges?

---

Greed can explain many things but not everything!

Are BTC and EUR financing both equally available? Not at all. EUR funds are much easier to find at nearly zero interest rate while BTC funding is more difficult to secure, especially long term, resulting in considerably higher interest rate. Applying same rollover fees for both longs and shorts means you stimulate BTC/EUR shorts and punish BTC/EUR longs.

Why would a bitcoin exchange side with bitcoin enemies?

I'll be honest, I always liked Kraken. They have never been hacked, they are upfront with the audit which gives me a security especially after all of the exchanges had some security problems. They had by far the biggest fees until now, but I have coped with that for the reasons above.

But them increasing their fees again is not cool at all. I mean too much is too much. This doesn't matter much for a casual trader that trades there once a month, but for daily traders, this matters very much. I guess they will just lose some users because of this move.

[Serpens66]

just ask it in the official Kraken thread and I'm sure Dargo will answer

I can see Dargo discussing many Kraken-related questions but can't find the "official" Kraken thread?

https://bitcointalk.org/index.php?topic=290799.0

[becoin]

just ask it in the official Kraken thread and I'm sure Dargo will answer

I can see Dargo discussing many Kraken-related questions but can't find the "official" Kraken thread?

https://bitcointalk.org/index.php?topic=290799.0

Thanks.

[Dargo]

Hi becoin,

Thanks for your questions. 

What's wrong with their margin trading fees?

They've started their margin trading with 0.05% rollover fees per day for both long and short positions. Today they informed me there are changes effective immediately. XBT/EUR rollover fee for maintaining a position is now 0.01% per 4 hours. Aside from the fact that fees are outrageously high, it is for the first time I see charging rollover fees per hour. Is rollover fees per hour a common practice among bitcoin exchanges? What's next - rollover fees per minute?

It's actually pretty common in Forex to charge on intervals shorter than 24 hours. In the bitcoin world, Bitmex charges 0.015% per 8 hours.

We set the fees partly based on what it costs us for the funds, which are loaned to us, but also based on the risk that we take in offering margin trading, which is considerable. The current rate adds up to 0.06% per 24 hours, which is comparable to the old rate at 0.05% per 24 hours, but of course it's a bigger difference for positions held less than 24 hours. We think the rates are reasonable given our costs and the risks involved, but we always consider the feedback we get from clients. We will also monitor how the change in rates impacts the demand and adjust accordingly if demand weakens too much. Obviously if demand goes down then so does our risk, so it's a matter of finding the right balance in terms of having good demand but also covering our costs and risks.

Also, we recently lowered our trade fees by quite a lot, so for many people the increase in margin fees is more than made up for by the decrease in trade fees, especially for those who usually provide liquidity (make) rather than take liquidity.

Are BTC and EUR financing both equally available? Not at all. EUR funds are much easier to find at nearly zero interest rate while BTC funding is more difficult to secure, especially long term, resulting in considerably higher interest rate. Applying same rollover fees for both longs and shorts means you stimulate BTC/EUR shorts and punish BTC/EUR longs.

Why would a bitcoin exchange side with bitcoin enemies?

Actually, in our experience, it's much easier to find BTC loans than it is to find fiat loans. And the same has traditionally been true on Bitfinex. If you look at the 90 day average swap rates here

https://www.bitfinex.com/pages/stats

you'll see that the average rate for USD is over 3x the rate for BTC. But right now the rate for BTC is a little bit higher than the rate for USD, which is unusual. But the difference isn't very large and I don't see how we are punishing the BTC longs.

I hope that addresses your concerns. Thanks again for your feedback. 

[ICFiedler]

We set the fees partly based on what it costs us for the funds, which are loaned to us, but also based on the risk that we take in offering margin trading, which is considerable.

Two thoughts on this:
(1) If you base the rates on your risk, the fees should be much lower for x2 leverage than x5 leverage. Do you plan to distinguish fees by leverage?

(2) I am sure some users will provide liquidity at lower rates, especially when they can choose short periods of hours instead of days (think of overnight loans). Do you plan to introduce a liquidity market for users? It would reveal the actual price of borrowing and still leave it open for kraken to provide its liquidity there.

[becoin]

Thanks for your response, Dargo.

It's actually pretty common in Forex to charge on intervals shorter than 24 hours.

No, it is not common. Not sure where your Forex trading experience comes from?

In the bitcoin world, Bitmex charges 0.015% per 8 hours.

Bitmex is a derivatives trading platform offering up to 1:25 leverage. Your maximum leverage is 1:5. Yet you charge 0.2 per 8 hours - highest in the bitcoin world!

We set the fees partly based on what it costs us for the funds, which are loaned to us, but also based on the risk that we take in offering margin trading, which is considerable.

Current USD and EUR LIBOR interest rates - maturity 1 year are less than 1%. You say that your 21.9% p. a. charge is "based" on what it costs you for the funds? You can say the same if you charge 121.9% or 1121.9% p. a. Why is that partnership with Fidor Bank if you can't borrow at 4-5%, which is even higher than current prime rate?

There is no market liquidity risk for you because forced liquidation is set at 40% of margin collateral (5% is for a standard Forex account). The fact that you increased maximum leverage from 1:3 to 1:5 is indicative that you understand that such risk is negligible. Of course, there will be a substantial risk if you use funds on customer accounts to fund/optimize margin trading. This is not something I'd recommend for any established bitcoin exchange!

Also, we recently lowered our trade fees by quite a lot, so for many people the increase in margin fees is more than made up for by the decrease in trade fees, especially for those who usually provide liquidity (make) rather than take liquidity.

This is something I don't understand. Why would makers be more important than takers? "Takers" provide volume. What liquidity are "makers" providing? Without "takers" there will be no trading at all. I suspect that all the "makers" and "takers" gimmick is designed to resemble Bitfinex practice of liquidity providers but without paying interest on customer funds used to provide liquidity. "Takers" are privileged in terms of lower trading fees because their funds are practically locked as margin collateral from the moment they place their order until this order is executed or canceled. And locked funds can be used to fund margin trading?! But this is very, very dangerous practice both from market and technical point of view. No increase in rollover fees can justify taking such a risk!

But right now the rate for BTC is a little bit higher than the rate for USD, which is unusual.

Good.
So, things on Bitfinex get back to normal. Question is, can they survive going back to normality?

Obviously if demand goes down then so does our risk, so it's a matter of finding the right balance in terms of having good demand but also covering our costs and risks.

Obviously, Kraken will continue to increase their fees and charges until demand goes down. But as corporate history shows, once such a point is reached, if you decrease your fees and charges demand never goes up to previous level. Your customers are already someone else's customers.

[ICFiedler]

In the bitcoin world, Bitmex charges 0.015% per 8 hours.

Bitmex is a derivatives trading platform offering up to 1:25 leverage. Your maximum leverage is 1:5. Yet you charge 0.2 per 8 hours - highest in the bitcoin world!

While I agree with your general statement, becoin, I would not prize kraken's margin fees as highest in the bitcoin world.

At Bitfinex you pay mostly between 0.06%-0.07% per day, which is very similar. At huobi you pay 0.1% per day for BTC, CNY or USD borrowing. That accumulates to 44% per year and is thus twice(!) as expensive. And at finex and huobi you do not get x5 leverage but x3.3 and x3, respectively.

There is no market liquidity risk for you because forced liquidation is set at 40% of margin collateral (5% is for a standard Forex account).

And regarding the margin collateral at 40% compared to 5% at forex: This difference reflects the different volatility of the underlyings. It makes perfect sense and I would not want kraken to lower the 40% margin collateral, because it would externalize risks to the exchange and, ultimately, other traders.

[becoin]

At Bitfinex you pay mostly between 0.06%-0.07% per day, which is very similar.

Do we look at same stats:
https://www.bitfinex.com/pages/stats

Current stats:

Currency Flash Return Rate
USD    0.0286%   
BTC   0.0347%

This is quite different from Kraken's 0.06% per day!

I would not want kraken to lower the 40% margin collateral

So do I.
Just saying you should not justify fees and charges increase by increased risks if there are no risks!

[Dargo]

We set the fees partly based on what it costs us for the funds, which are loaned to us, but also based on the risk that we take in offering margin trading, which is considerable.

Two thoughts on this:
(1) If you base the rates on your risk, the fees should be much lower for x2 leverage than x5 leverage. Do you plan to distinguish fees by leverage?

(2) I am sure some users will provide liquidity at lower rates, especially when they can choose short periods of hours instead of days (think of overnight loans). Do you plan to introduce a liquidity market for users? It would reveal the actual price of borrowing and still leave it open for kraken to provide its liquidity there.

(1) - We thought about doing that but for now we are keeping it at one fee and don't have plans to change it at this time.

(2) - We may do this eventually, but it's not something that would happen any time soon.

[Dargo]

Thanks for your response, Dargo.

It's actually pretty common in Forex to charge on intervals shorter than 24 hours.

No, it is not common. Not sure where your Forex trading experience comes from?

Well my understanding was that it's fairly common, but perhaps I'm wrong about that. I assume that you only care about the rollover time period insofar as it affects borrowing costs, so it's probably best to just discuss that issue.

We set the fees partly based on what it costs us for the funds, which are loaned to us, but also based on the risk that we take in offering margin trading, which is considerable.

Current USD and EUR LIBOR interest rates - maturity 1 year are less than 1%. You say that your 21.9% p. a. charge is "based" on what it costs you for the funds? You can say the same if you charge 121.9% or 1121.9% p. a. Why is that partnership with Fidor Bank if you can't borrow at 4-5%, which is even higher than current prime rate?

I said it's partly based on our costs, not entirely based on that. People are not exactly lining up to loan us fiat and in fact we get many many more offers for loans of BTC. So, as I said, in our experience it's much easier to find BTC to borrow than it is to find fiat. 

There is no market liquidity risk for you because forced liquidation is set at 40% of margin collateral (5% is for a standard Forex account). The fact that you increased maximum leverage from 1:3 to 1:5 is indicative that you understand that such risk is negligible. Of course, there will be a substantial risk if you use funds on customer accounts to fund/optimize margin trading. This is not something I'd recommend for any established bitcoin exchange!

So you think that there is no risk at all for us in offering margin trading? I'm not sure why you think that, but we simply don't see it that way. Offering 5x max leverage does not for us reflect the view that the risk is negligible, only that it is acceptable risk given the added revenue it provides.

Also, we recently lowered our trade fees by quite a lot, so for many people the increase in margin fees is more than made up for by the decrease in trade fees, especially for those who usually provide liquidity (make) rather than take liquidity.

This is something I don't understand. Why would makers be more important than takers? "Takers" provide volume. What liquidity are "makers" providing? Without "takers" there will be no trading at all. I suspect that all the "makers" and "takers" gimmick is designed to resemble Bitfinex practice of liquidity providers but without paying interest on customer funds used to provide liquidity. "Takers" are privileged in terms of lower trading fees because their funds are practically locked as margin collateral from the moment they place their order until this order is executed or canceled. And locked funds can be used to fund margin trading?! But this is very, very dangerous practice both from market and technical point of view. No increase in rollover fees can justify taking such a risk!

There are pros and cons to a maker taker model. We had overwhelming demand for it from our clients and that ultimately is why we switched to it. I'm not following the last part of your comment here.

[miguelmorales85]

I love kraken and their exchange frontend.. sadly the fees are too high for my trading volume..

Cheers

[Blawpaw]

What's wrong with their margin trading fees?

They've started their margin trading with 0.05% rollover fees per day for both long and short positions. Today they informed me there are changes effective immediately. XBT/EUR rollover fee for maintaining a position is now 0.01% per 4 hours. Aside from the fact that fees are outrageously high, it is for the first time I see charging rollover fees per hour. Is rollover fees per hour a common practice among bitcoin exchanges? What's next - rollover fees per minute?

Well, Kraken has always been one of the cheapest exchanges in terms of fees. Now, for them to be able to offer new features and other developments Kraken is raising som e of their service fess.

[STRML]

It's actually pretty common in Forex to charge on intervals shorter than 24 hours. In the bitcoin world, Bitmex charges 0.015% per 8 hours.

FYI, we haven't charged this insurance fee since late July - while we were on free trading in late July through August, we greatly simplified the fee system for when it turned back on in September. We simply do flat trading fees (mostly maker/taker 0/0.05%). We found this to be much easier for everyone to understand and to compare with other platforms.

That said, charging a funding fee makes sense on a margined platform where there is risk of loss, and that's why we did it in the first place. We found in the end that the confusion was not worthwhile, but it's a perfectly legitimate fee structure.

[coinpr0n]

The fee was only increased 0.01% ... where you're now paying 0.06% instead of 0.05% but you could actually end up paying less since you won't be charged the fee for a complete day. I think it's reasonable.