I think there is a failure to communicate here. The icbit administrator sees the exchange as one thing, while most of the traders see it as something else.
The admin believes that people are accountable for their promises. If they buy on margin, they are promising to repay the debt in full. For example, suppose I buy a contract. Rather than pay the entire cost, I pay 10%. Who is paying for the rest of the contract? Well, traditionally it is a lending bank. However, there is no bank here, so icbit gives you a "loan" and sets a margin. If your investment tanks, the entire value of the contract must be payed out. If I put in only 10%, where does the rest come from? It has to come from icbit, however icbit has no intention of losing money because of my poor investment. So, icbit says that I am responsible for the remainder. At this point, icbit and many traders do not see eye to eye.
Traditionally, when a lending bank offers you a margin, if your investment falls below the margin, you can add money to keep your position open, or the bank sells you futures. If the trader chooses to let his investment go, then he loses no more than what he put in (say 10%). I believe most traders feel this is how icbit should operate. Unfortunately, if this happens someone needs to pay the counter party, and it is not going to be icbit.
The current infrastructure on icbit is absolutely
not compatible with icbit's philosophy. This is the half of the problem. The icbit platform reserves an initial margin. The implication being that this is the most you can lose in one trading session. Unfortunately, this is simply not true. The administrator made it clear in chat and email that the idea is that each trader is responsible in full, even though the system reserves only a small amount. This leads to the second half of the problem. There are no written guidelines that state this.
I was recently bitten by this bug. I assumed that I was responsible for only the initial margin. I tried to move funds elsewhere. My withdrawal was suspended and then rejected. I wrote the administrator about it.
I am not sure if you remember, I spoke with you on chat last night. I requested a withdrawal of 3 BTC to my MtGox account, and the transaction was pending. I had enough funds in my account at the time. The margin increased after my withdrawal. I asked you about it. I believe you said it would go through the next day when MtGox started working again. It seems it did not. Can you please advise? Thank you.
I got a very nice response.
I'm really sorry, but I see that your account is empty now after it was margin called. If you wanted to leave some BTC on your account, you should have told me to sell off your positions earlier, and not just withdrawing money.
However it's a bit tricky, because as you say you made the withdraw request before teh margin requirements increase. However, it was after the market collapsed, so it was already obvious that you were trying to salvage as much funds as possible.
I am up to settle this, but I need some reasons. If I decide to settle this, I will have to pay this 3 BTC from my pocket, but I need some reasons why I should do so. The reason that first you bought as much contracts as possible, then had enough of time to sell them, didn't sell, and then tried to withdraw money when it was hard to sell, is a bad excuse.
At this point, it should be clear what is happening. The administrator believes I owe my counter parties. I was under the impression that all I owed was the initial margin, and the rest of my funds were mine to do what I pleased with.
Thank you for getting back to me. I did not buy as many contracts as possible. I had about half the contracts I could afford. I was trying to hedge my bets. I was expecting the market to keep crashing. I believe it was around 150-180 at the point. I moved about half of my funds to MtGox (at least, that was the idea) and I was going to sell those for USD to buy at a lower price. I left the other half and maintained my long position in case the dip was short lived.
The admin's position should be clear, but his failure was in not documenting policy. I pointed this out.
May I suggest making the policy clear in the future. I feel like I cannot make any sensible trades. Any generally safe action I take backfires when the policy changes. This is not the first time this is happening. I have lost over 5 BTC in all on icbit due to last minute rule changes. I understand that you need to react to ever changing market conditions. However, an imperfect policy that everyone knows about is infinitely better than a constantly changing set of rules.
If you wish to hold funds that have been requested for withdrawal, this is highly unusual, but acceptable as long as everyone knows. If you wish to change margins at random times of the day, this too is fine, as long as everybody knows. What is not acceptable is a trader coming back from lunch and seeing that all of his money is gone because there were 2 unannounced clearings.
And he agrees.
I fully agree with your concerns. We are going to write up a general "terms" page, discuss it with community, and then ask our users to accept it.
So, in the end, I was partially compensated for my loss from icbit's personal wallet. This clearly shows he is trying to take steps in the right direction.
I would argue that the obvious interpretation of the initial margin is the maximum amount you are liable for. And when withdrawing funds, those funds are automatically safe. These are not the only interpretations, but I would think most people would agree with them. The admin clearly does not. This is fine, but he must publish a clear policy before I use the exchange again.
