[OFFICIAL]Bitfinex.com first Bitcoin P2P lending platform for leverage trading

[SebastianJu]

I think i get it slowly how to trade successfully. Though the problem is that profits are reached slowly while losses are reached very fast. The problem is the fee. Without the fee the risks would be the same in both directions. So in order to make a profit its good to trade with lower fees. But it seems i cant avoid it, even when watching closely to only put in orders between margin buy and sell prices, that i buy into the market as taker. And this brings a hit on my profits. I would like to avoid that but i dont see a way. Bitfinex only has this interface and the API seems to be restricted on the amount of requests doable per minute. So theres always a risk. The only solution i see is an option like "dont fill order as taker". Thats it. And i think it shouldnt be a big change in code.

Please think about this since it really hurts having to pay the taker fee. I mean one has to take a good jump in price only to get back the taker fees of a buy and sell order. As a closed trade cycle. I think this should be doable since bitfinex has an interest on market makers too. Thats why the maker-taker-fee-model exists.

[mjr]

This is just ridiculous...

None of us at Bitfinex take advantage of any inside information, and each of us monitors each other to make sure that we are behaving ethically. However, how would we go about obtaining bitcoin? We work hard to build a good exchange, because we believe in bitcoin, so we should go trade on another exchange? I have known Phil a long time, and he is extremely ethical. I, for one, use bitcoin in order to withdraw my paycheck. I usually place a small market order once a month, but I have no idea what the state of hidden orders are, or whether the market is going up or down, and I don't much care about those things. I need to convert a certain amount of dollars into the equivalent amount of bitcoin, so I just buy some bitcoin.

I'm not sure how this works in the "real world", but I am pretty sure that someone who works at Nasdaq can still trade stocks that are listed on Nasdaq. They aren't getting any special information, or access to a VIP service, but they still probably have a retirement account, or something along those lines, and still have investments. I don't think that because someone works at Nasdaq, they cannot own Apple shares in their retirement account. So, I am beyond annoyed that people think that someone who is interested in bitcoin enough to work in the bitcoin space, surprise, surprise, buys bitcoin...what is the alternative, that everyone interested in bitcoin enough to work in that space cannot use their own product?

Anyway, I think most people have enough experience with Bitfinex to know that we value our reputation as a fair place to trade, and specifically keep rules in place that cost us money because we think that the benefits of a fair marketplace far outweigh the small short term gains of cheating. I've been a big fan of bitfinex since before I started working here, and I haven't closed my account just because I got a job here.

[mjr]

I think i get it slowly how to trade successfully. Though the problem is that profits are reached slowly while losses are reached very fast. The problem is the fee. Without the fee the risks would be the same in both directions. So in order to make a profit its good to trade with lower fees. But it seems i cant avoid it, even when watching closely to only put in orders between margin buy and sell prices, that i buy into the market as taker. And this brings a hit on my profits. I would like to avoid that but i dont see a way. Bitfinex only has this interface and the API seems to be restricted on the amount of requests doable per minute. So theres always a risk. The only solution i see is an option like "dont fill order as taker". Thats it. And i think it shouldnt be a big change in code.

Please think about this since it really hurts having to pay the taker fee. I mean one has to take a good jump in price only to get back the taker fees of a buy and sell order. As a closed trade cycle. I think this should be doable since bitfinex has an interest on market makers too. Thats why the maker-taker-fee-model exists.

The way most people avoid this is to price their orders more aggressively. If the market is trading around 210-211, I would suggest putting in a buy at 208 or a sell at 213...it is a balancing act, because you do want to get filled, but you don't want to pay higher fees. This is all part of what makes trading such an inexact science or a demanding art. I do think that it is an interesting suggestion to include an order type that says "maker or cancel", or something like that. The implementation might be a little tricky, because you have to go through the whole matching process in order to know whether you should cancel the order...and it could be used to try to gain information without risk.

In traditional finance, lowering the costs associated with trading is one of the main ways that people increase their profits, but it is not very easy, usually, and comes with the same balancing act of speed of execution vs cost of execution (sending an order to ARCA vs a darkpool, most traders know they could get filled on ARCA, but use it as a last resort).

[Walsoraj]

This is just ridiculous...

None of us at Bitfinex take advantage of any inside information, and each of us monitors each other to make sure that we are behaving ethically. However, how would we go about obtaining bitcoin? We work hard to build a good exchange, because we believe in bitcoin, so we should go trade on another exchange? I have known Phil a long time, and he is extremely ethical. I, for one, use bitcoin in order to withdraw my paycheck. I usually place a small market order once a month, but I have no idea what the state of hidden orders are, or whether the market is going up or down, and I don't much care about those things. I need to convert a certain amount of dollars into the equivalent amount of bitcoin, so I just buy some bitcoin.

I'm not sure how this works in the "real world", but I am pretty sure that someone who works at Nasdaq can still trade stocks that are listed on Nasdaq. They aren't getting any special information, or access to a VIP service, but they still probably have a retirement account, or something along those lines, and still have investments. I don't think that because someone works at Nasdaq, they cannot own Apple shares in their retirement account. So, I am beyond annoyed that people think that someone who is interested in bitcoin enough to work in the bitcoin space, surprise, surprise, buys bitcoin...what is the alternative, that everyone interested in bitcoin enough to work in that space cannot use their own product?

Anyway, I think most people have enough experience with Bitfinex to know that we value our reputation as a fair place to trade, and specifically keep rules in place that cost us money because we think that the benefits of a fair marketplace far outweigh the small short term gains of cheating. I've been a big fan of bitfinex since before I started working here, and I haven't closed my account just because I got a job here.

Let me get this straight. You acknowledge Phil's story and admit to trading on your own exchange but maintain, "there is no insider trading, because: believe me."

[SebastianJu]

I think i get it slowly how to trade successfully. Though the problem is that profits are reached slowly while losses are reached very fast. The problem is the fee. Without the fee the risks would be the same in both directions. So in order to make a profit its good to trade with lower fees. But it seems i cant avoid it, even when watching closely to only put in orders between margin buy and sell prices, that i buy into the market as taker. And this brings a hit on my profits. I would like to avoid that but i dont see a way. Bitfinex only has this interface and the API seems to be restricted on the amount of requests doable per minute. So theres always a risk. The only solution i see is an option like "dont fill order as taker". Thats it. And i think it shouldnt be a big change in code.

Please think about this since it really hurts having to pay the taker fee. I mean one has to take a good jump in price only to get back the taker fees of a buy and sell order. As a closed trade cycle. I think this should be doable since bitfinex has an interest on market makers too. Thats why the maker-taker-fee-model exists.

The way most people avoid this is to price their orders more aggressively. If the market is trading around 210-211, I would suggest putting in a buy at 208 or a sell at 213...it is a balancing act, because you do want to get filled, but you don't want to pay higher fees. This is all part of what makes trading such an inexact science or a demanding art. I do think that it is an interesting suggestion to include an order type that says "maker or cancel", or something like that. The implementation might be a little tricky, because you have to go through the whole matching process in order to know whether you should cancel the order...and it could be used to try to gain information without risk.

In traditional finance, lowering the costs associated with trading is one of the main ways that people increase their profits, but it is not very easy, usually, and comes with the same balancing act of speed of execution vs cost of execution (sending an order to ARCA vs a darkpool, most traders know they could get filled on ARCA, but use it as a last resort).

Sounds good that you find the idea interesting. Information leaking shouldnt be a problem because if you mean hidden orders then one can find it out with an automated miniorder too. I mean if there is a hidden order.

The thing is only that its pretty hard to collect some profits when you hit the taker fee.

Regarding the trading on the own exchange. I dont know how people think this can be avoided. I mean you guys own the exchange and it is on trust like with every exchange. There is no regulation of some kind that checks if you trade. So even if you all claim that you dont trade... nobody would know when you do. So at the end its nonsense to me to get loud about this. So im not sure what people await. Did they trade on bitfinex and never thought about that its unregulated and without state regulation or are those only the kind of persons that try to make other businesses look bad.
At the moment i only see something i never doubted that it exists and that i awaited. I wonder where this comes from. If there would be strange happenings or so. But as it looks now there are only bad thoughts in persons that believe other persons would have the same kind of bad thinking. 

Anyway... as long as there is no sign that things are manipulated...

[nrd525]

I think there is a good case for not trading on your own exchange.

If you are trading on your own exchange you could enact policies to balance the playing field. For instance, you could eliminate hidden orders (or use cryptography so that even the admin could not see them), publicly show the amount of USD and BTC going in and out of the website in real-time, and publicize the number of logged in users (or any other data that would be available to site staff that could influence the price).

Or you could place restrictions on internal trading. For instance, limit it to small amounts and long-term trades.

Hmm - even if you trade on another exchange, you still have access to inside information from Bitfinex which will affect prices on other exchanges.

[medicine]

I think there is a good case for not trading on your own exchange.

If you are trading on your own exchange you could enact policies to balance the playing field. For instance, you could eliminate hidden orders (or use cryptography so that even the admin could not see them), publicly show the amount of USD and BTC going in and out of the website in real-time, and publicize the number of logged in users (or any other data that would be available to site staff that could influence the price).

Or you could place restrictions on internal trading. For instance, limit it to small amounts and long-term trades.

Hmm - even if you trade on another exchange, you still have access to inside information from Bitfinex which will affect prices on other exchanges.

Free market does not mean fair market in my opinion.  Many people are competing to get a small edge with trading bots set up to monitor many variables across multiple exchanges.  Banning employees from trading on  Bitfinex may be a solution here, but unlikely to cause traders to lose any less money than some other reason.
This issue is too minor and there is almost nothing we can do about it, so it's a non issue at the moment in my opinion. 

No I do not work for Bitfinex.

[sangaman]

I don't really see a problem w/ Bitfinex admins or employees trading on their own platform. If there's reason to believe they're running large-scale trading operation using inside info about the system as their entire edge, then perhaps that's a different story.

The main difference between Bitfinex employees trading on Bitfinex and what's normally considered insider "trading" is that Bitfinex does not trade in its own shares, it trades in bitcoin. Whatever edge a Bitfinex admin might have - lets say they see a bunch of hidden buy orders and USD deposits coming through and believe price is heading up short term - can be used anywhere bitcoins are bought and sold. If bitfinex employees use their knowledge as employees to trade on Bitstamp, is there still a conflict of interest? I wouldn't say so, largely because if so then it could be argued that almost anyone involved in bitcoin or bitcoin businesses has insider information and should not be allowed to trade bitcoin.

[RedhatCAT]

This is just ridiculous...

None of us at Bitfinex take advantage of any inside information, and each of us monitors each other to make sure that we are behaving ethically. However, how would we go about obtaining bitcoin? We work hard to build a good exchange, because we believe in bitcoin, so we should go trade on another exchange? I have known Phil a long time, and he is extremely ethical. I, for one, use bitcoin in order to withdraw my paycheck. I usually place a small market order once a month, but I have no idea what the state of hidden orders are, or whether the market is going up or down, and I don't much care about those things. I need to convert a certain amount of dollars into the equivalent amount of bitcoin, so I just buy some bitcoin.

I'm not sure how this works in the "real world", but I am pretty sure that someone who works at Nasdaq can still trade stocks that are listed on Nasdaq. They aren't getting any special information, or access to a VIP service, but they still probably have a retirement account, or something along those lines, and still have investments. I don't think that because someone works at Nasdaq, they cannot own Apple shares in their retirement account. So, I am beyond annoyed that people think that someone who is interested in bitcoin enough to work in the bitcoin space, surprise, surprise, buys bitcoin...what is the alternative, that everyone interested in bitcoin enough to work in that space cannot use their own product?

Anyway, I think most people have enough experience with Bitfinex to know that we value our reputation as a fair place to trade, and specifically keep rules in place that cost us money because we think that the benefits of a fair marketplace far outweigh the small short term gains of cheating. I've been a big fan of bitfinex since before I started working here, and I haven't closed my account just because I got a job here.

When you have access to sensitive information you really should not be trading on your exchange at all. The fact that bitfinex allows for anon accounts makes it very easy to trade on inside information without anyone ever knowing. Even their 2fa system essentially cannot be traced back to you 

[DoubleSwapper]

My view is similar to sangaman on this. If they wanted to inside trade on a big scale they would likely do it not on their exchange just like insiders often trade through third persons. If bitfinex was actively and automatically trading against its users by front running, stop huntingen etc. they wouldn't tell us anyway.
It's best to keep a close eye on trading/the order book just like people are doing now and mentioning any possible manipulations like the volume manipulation that is rampant on zero fee exchanges. If something like that on BFX happens be sure to notify people.
Mjr has mentioned countless of times in the past that he is prodiving swaps on BFX which initially made me wonder as well but I guess it's to be expected in an unregulated market like this.

What I'd like to see from BFX in the near future is the following:

1. An official statement on their policy regarding inside trading and a promise that their employees/founders are not actively trading against BFX regular users.

2. An official statement regarding the potential losses incurred through the Egopay incident and how they will be shouldered.

3. An explanation about "tether". It seems clear that tether has a direct affiliation with Bitfinex and I want to make sure BFX stays safe when they enter the international money transmitter business. Some former companies like liberty reserve got burned very badly for their operation. Why is tether already integrated into Bitfinex if it is not even usable at the moment?

[Bagpipe]

you are already operating under assumptions that may no longer be true. During the transit time of your order, there could be even further changes...

Luckily, these are just theoretical problems, in practice we handle 100's of thousands of orders and are able to fill people in the way they would expect.

...but there is NO matching engine with infinite capacity, and if it is over capacity, you would be in the same exact situation. Until it can handle that given order, you will remain "unfilled".

Yes there is such an engine, it is called btc-e. There never in my life has been an occasion when a market order has not been filled instantly, no matter how much loaded and DDoSed the site was, it always filled after pressing the button with result right back. Once, when the site took 12 seconds to reload (if at all), orders were passing still at a fraction of that time. you have the opposite. Your site works, but order execution is "optional". and as I said: using time&price groups would make the matching way faster...

You are contradicting yourself: no you are NOT able to fill the orders the way people expect.
We keep repeating this to you but you just don't hear. Your order matching performance is on the level of 386SX. I guess it is because of the software and database you are using, you are doing it in a an overcomplicated way.

[Bagpipe]

This is just ridiculous...
None of us at Bitfinex take advantage of any inside information, and each of us monitors each other to make sure that we are behaving ethically.

I do not think bitfinex abuses their postion; but ANY user with access to TIMELY information on the market DOES abuse it heavily; the 2-5 second delay bitfinex has can cause me 2% losses on any market order trade. Because, by some MIRACLE, hundreds of other users decide to make the same market orders in the very same split of a second as I do. This Results in my orders many time given the worst pricing

But I do not think bitfinex employees are actively behind it. This is by design.

P.S. yes, the NYSE and such traders actively abuse it as well. The very same way. They can cut in line because they KNOW sooner and EXECUTE sooner. Especially because they are machines.

[Bagpipe]

This is just ridiculous...

This is the article from reddit that people refer to: feel free to delete after reading: (I can delete it as well)

Phil G. Potter is a major stakeholder of Bitfinex and has administrative access to the backend platform including direct access to the database and is often present on a teamspeak voice channel where around 200 trader chat and share trading analysis.

Yesterday he was asked if he trades on his own platform Bitfinex, to which he replied yes. He was then grilled "don't you think that is a conflict of interests because you have special access to the platform?" - that is, he can see things normal traders cannot, like hidden orders, the size of everyone's accounts, the open margin positions of accounts, exact trading activity of each user, how much USD is flowing into and out of the exchange (he would have the competitive advantage of knowing when big players are feeling bullish). All of this gives a huge competitive advantage. After this questions, he tried to back-pedal but made it worse by trying to justify it by saying because he is an early adopter (meaning he has a lot of coins and qualifies as a whale) he "only trades a little bit here and there".

http://vocaroo.com/i/s1JIOjeIjWbN <-- transcript of him trying to backpedal out of saying he trades but rather "invests"

"Currently Phil manages a Bitcoin arbitrage and trading hedge fund" (this information found on https://tether.to/team/). This constitutes a serious conflict of interest. Anyone who has any experience with hedgefunds know that margin calls and stoplosses are extremely confidential for a reason.

[mjr]

Real quick,
1. We lost almost nothing in EgoPay, there are no losses that are of a size where we need to worry about them, so as far as who is "shouldering" them, we are. We already cut our losses, and it didn't really make any impact, as we have said before, they were never a very popular method of deposit or withdrawal.

2. First off, anyone at bitfinex should be able to use bitfinex. As others have mentioned, we are all interested in an asset, but we don't have inside information into bitcoin. That being said, we don't allow any employees to game the system by front running orders, etc. As someone mentioned, we have long term positions, which may need to be adjusted, but we all trade on our own accounts, and they are monitored by the whole management team as a check and balance system. As far as my swaps, I have exactly the same information as the rest of you, I don't tinker with the production data, as I am working on integrating the new system which is not live yet.

3. Tether.to is separate from Bitfinex, but something we are interested in, specifically because it addresses some of the problems that we have run into in the past. The two concerns are separate, so I don't think there would be any cause for concern as far as Bitfinex being affected.

I really do appreciate the latest comments, especially a few by SebastianJu. I will be back to comment some more soon.

[mjr]

This is just ridiculous...

This is the article from reddit that people refer to: feel free to delete after reading: (I can delete it as well)

Phil G. Potter is a major stakeholder of Bitfinex and has administrative access to the backend platform including direct access to the database and is often present on a teamspeak voice channel where around 200 trader chat and share trading analysis.

Yesterday he was asked if he trades on his own platform Bitfinex, to which he replied yes. He was then grilled "don't you think that is a conflict of interests because you have special access to the platform?" - that is, he can see things normal traders cannot, like hidden orders, the size of everyone's accounts, the open margin positions of accounts, exact trading activity of each user, how much USD is flowing into and out of the exchange (he would have the competitive advantage of knowing when big players are feeling bullish). All of this gives a huge competitive advantage. After this questions, he tried to back-pedal but made it worse by trying to justify it by saying because he is an early adopter (meaning he has a lot of coins and qualifies as a whale) he "only trades a little bit here and there".

http://vocaroo.com/i/s1JIOjeIjWbN <-- transcript of him trying to backpedal out of saying he trades but rather "invests"

"Currently Phil manages a Bitcoin arbitrage and trading hedge fund" (this information found on https://tether.to/team/). This constitutes a serious conflict of interest. Anyone who has any experience with hedgefunds know that margin calls and stoplosses are extremely confidential for a reason.

This was incorrect, the tether.to site will be updated, but Phil did manage a fund, roughly around the fall of Mt Gox, he ceased those activities and joined Bitfinex. It was simply an old version of a bio, which should have been updated to read "Phil managed a Bitcoin arbitrage and trading hedge fund". Just wanted to clarify that he doesn't currently manage that fund.

None of us are actively trading, and although we do need to trade sometimes (I, for example, use bitcoin to send my paycheck to myself) this is all monitored by the entire management team.

[mjr]

I don't really see a problem w/ Bitfinex admins or employees trading on their own platform. If there's reason to believe they're running large-scale trading operation using inside info about the system as their entire edge, then perhaps that's a different story.

The main difference between Bitfinex employees trading on Bitfinex and what's normally considered insider "trading" is that Bitfinex does not trade in its own shares, it trades in bitcoin. Whatever edge a Bitfinex admin might have - lets say they see a bunch of hidden buy orders and USD deposits coming through and believe price is heading up short term - can be used anywhere bitcoins are bought and sold. If bitfinex employees use their knowledge as employees to trade on Bitstamp, is there still a conflict of interest? I wouldn't say so, largely because if so then it could be argued that almost anyone involved in bitcoin or bitcoin businesses has insider information and should not be allowed to trade bitcoin.

This is exactly right. Even in regulated markets, a CEO can go through certain steps to trade his own shares, and stock options are commonly given out as compensation. That being said, we aren't the issuer of bitcoin, so from the "inside information" standpoint, this is not the case. We don't trade based on any information that is not publicly available. We hold ourselves to a high ethical standard, and to be honest, we are doing well by providing a good exchange platform, and are in it for the long haul.

[mjr]

you are already operating under assumptions that may no longer be true. During the transit time of your order, there could be even further changes...

Luckily, these are just theoretical problems, in practice we handle 100's of thousands of orders and are able to fill people in the way they would expect.

...but there is NO matching engine with infinite capacity, and if it is over capacity, you would be in the same exact situation. Until it can handle that given order, you will remain "unfilled".

Yes there is such an engine, it is called btc-e. There never in my life has been an occasion when a market order has not been filled instantly, no matter how much loaded and DDoSed the site was, it always filled after pressing the button with result right back. Once, when the site took 12 seconds to reload (if at all), orders were passing still at a fraction of that time. you have the opposite. Your site works, but order execution is "optional". and as I said: using time&price groups would make the matching way faster...

You are contradicting yourself: no you are NOT able to fill the orders the way people expect.
We keep repeating this to you but you just don't hear. Your order matching performance is on the level of 386SX. I guess it is because of the software and database you are using, you are doing it in a an overcomplicated way.

BTC-E can't claim to operate under the load we do because their volume is way lower than ours...there are probably a TON of exchanges with no volume that have 0 lag. Enjoy?

That being said, we are currently in the process of upgrading our backend systems, as I have mentioned many times in other posts. So...your concerns are being addressed.

[mjr]

This is just ridiculous...

None of us at Bitfinex take advantage of any inside information, and each of us monitors each other to make sure that we are behaving ethically. However, how would we go about obtaining bitcoin? We work hard to build a good exchange, because we believe in bitcoin, so we should go trade on another exchange? I have known Phil a long time, and he is extremely ethical. I, for one, use bitcoin in order to withdraw my paycheck. I usually place a small market order once a month, but I have no idea what the state of hidden orders are, or whether the market is going up or down, and I don't much care about those things. I need to convert a certain amount of dollars into the equivalent amount of bitcoin, so I just buy some bitcoin.

I'm not sure how this works in the "real world", but I am pretty sure that someone who works at Nasdaq can still trade stocks that are listed on Nasdaq. They aren't getting any special information, or access to a VIP service, but they still probably have a retirement account, or something along those lines, and still have investments. I don't think that because someone works at Nasdaq, they cannot own Apple shares in their retirement account. So, I am beyond annoyed that people think that someone who is interested in bitcoin enough to work in the bitcoin space, surprise, surprise, buys bitcoin...what is the alternative, that everyone interested in bitcoin enough to work in that space cannot use their own product?

Anyway, I think most people have enough experience with Bitfinex to know that we value our reputation as a fair place to trade, and specifically keep rules in place that cost us money because we think that the benefits of a fair marketplace far outweigh the small short term gains of cheating. I've been a big fan of bitfinex since before I started working here, and I haven't closed my account just because I got a job here.

Let me get this straight. You acknowledge Phil's story and admit to trading on your own exchange but maintain, "there is no insider trading, because: believe me."

I don't understand, yes, if I need to buy bitcoins, I buy them on Bitfinex...the same way anyone else who happened to need bitcoin would. All of my trades are monitored by the management team, including our head of compliance. So, to say that by working at a bitcoin exchange, you are precluded from buying and selling bitcoin is crazy. We have a system in place to avoid people abusing their position, because we value a fair market.

[N12]

2. First off, anyone at bitfinex should be able to use bitfinex. As others have mentioned, we are all interested in an asset, but we don't have inside information into bitcoin. That being said, we don't allow any employees to game the system by front running orders, etc. As someone mentioned, we have long term positions, which may need to be adjusted, but we all trade on our own accounts, and they are monitored by the whole management team as a check and balance system. As far as my swaps, I have exactly the same information as the rest of you, I don't tinker with the production data, as I am working on integrating the new system which is not live yet.

Phew, Bitfinex insiders control their own inside trading.

Nothing to see here.

 

http://vocaroo.com/i/s1JIOjeIjWbN

[Bagpipe]

2. First off, anyone at bitfinex should be able to use bitfinex. As others have mentioned, we are all interested in an asset, but we don't have inside information into bitcoin. That being said, we don't allow any employees to game the system by front running orders, etc. As someone mentioned, we have long term positions, which may need to be adjusted, but we all trade on our own accounts, and they are monitored by the whole management team as a check and balance system. As far as my swaps, I have exactly the same information as the rest of you, I don't tinker with the production data, as I am working on integrating the new system which is not live yet.

Phew, Bitfinex insiders control their own inside trading.

No, you misunderstood it. The management keeps the manager in question in check, they watch him so he doesn't do anything bad.