ICBIT Derivatives Market (USD/BTC futures trading) - LIVE

[Ichthyo]

It would seem that you're onto the right nature of a solution. I'm not sure that changing the range calculation alone achieves the desired result. Perhaps the clearing price should be set with the (volume) weighted avg, and combine that with a weight for proximity to clearing time.
If the trades right at that time moved the clearing price less than the trades mid-session, there'd be considerably less incentive to try to game it.

Absolutely. And it really should be a weighted average. And I think, the bids and asks should only be used when there was no trade all day long.
What IMHO is broken right now is that you're able to cause a tangible effect on people's balances without the need of any significant input and thus with only moderate risk. The moment the manipulator(s) are forced to do a significant amount of actual trading to cause any effect, I'd consider that issue as "fixed", as far as the platform is concerned.

really, either before or after, as I see there's a converse behavior of pushing the clearing price in one direction before clearing, and immediately pushing the price in the opposite direction right after clearing.

My guess is rather these are different market contributors. The manipulator(s) don't care much most of the day. The buying-away of ask orders and the short-time placing of high bid orders seem to happen just right before the cut-off

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[Fireball]

What IMHO is broken right now is that you're able to cause a tangible effect on people's balances without the need of any significant input and thus with only moderate risk. The moment the manipulator(s) are forced to do a significant amount of actual trading to cause any effect, I'd consider that issue as "fixed", as far as the platform is concerned.

Yes, this is a major problem when the volume is very tiny.

I foresee two solutions, one may add to each other:
1. The boundaries will be set using weighted average USD/BTC rate multiplied by respective boundaries for that futures contract at CME exchange. This should provide a fair trading range for all.
2. Increasing liquidity by providing market making. This should actually help because more liquidity would make it more harder to steer the market away from real prices.

Thanks a lot for reporting this issue.

[Ichthyo]

What IMHO is broken right now is that you're able to cause a tangible effect on people's balances without the need of any significant input and thus with only moderate risk. The moment the manipulator(s) are forced to do a significant amount of actual trading to cause any effect, I'd consider that issue as "fixed", as far as the platform is concerned.

I foresee two solutions, one may add to each other:
1. The boundaries will be set using weighted average USD/BTC rate multiplied by respective boundaries for that futures contract at CME exchange. This should provide a fair trading range for all.

Probably we'll need indeed a mix of measures, and what you propose sounds like a good approach. When the trading boundaries are tied more closely to the situation on the underlying market, this protects the opened positions against manipulations without actual market activity.


But we should also consider how the "current rate" is established in ICBIT.
It is an important fact of the platform's construction, that this "current rate" does have a very tangible monetary effect once a day, at a time known to everyone in advance. Since the platform provides leverage, a comparatively small move of that "current rate" at the right time can yield either a huge pile of additional trading power, or in the other case, can disable a market contributor completely. Since when your available margin goes negative, you can't contribute actively in the market anymore. You're forced then either to close some position with loss, or to inject additional liquidity, or just to sit there and watch the market pass by. This bears the danger of producing an self-reinforcing avalanche effect of distortion.

While I am in no way criticising the basic behaviour (I think it is adequate and a defining feature of this platform), this creates an especially strong incentive for trying to game the engine. And this is what we see here.

Some thoughts:

• can you please revisit the way the "current rate" is calculated when there is no offer at all at one side? Several days in row we had now the situation that someone has bought away the whole ask side. I get the impression that in this case the engine picks the average of the highest bid and the upper bound of the trading range to establish the "current rate". This yields a value way too high.
• also it seems that this "current rate" is sensitive to the order of execution, especially it sticks to the last deal done. If someone buys away all (or a large number) of offers, the "current rate" thus sticks to the last transaction, which is always the transaction most off-centre. This does in no way conceptually reflect the "current rate", which should be close to the centre of activity. Especially when someone buys away the bids/asks set by some market making bot, this can cause a gross distortion
• would it be helpful not to base the mark-to-market on the "current rate"? Why not doing a mark-to-market, using the weighted average of the last trading session?
• another proposal: why not picking a random unpredictable time point for this mark-to-market operation? That would mean just to use trading sessions with a variable, randomly picked duration.

I think there are good manipulations and objectionable manipulations. I tend to see a manipulation as acceptable, when it is combined with actual market movement (even just in the futures market) and when it is bears a substantial risk. On the other hand, a manipulation just exploiting some technicalities of the engine without real market activity is objectionable and should be prevented by technical means.

[Ichthyo]

will be interesting to watch what happens this evening shortly before 21:00 on the oil futures
Right now the rate is below 8.30
And the whole ask side has been bought away again... 

[Fireball]

But we should also consider how the "current rate" is established in ICBIT.
It is an important fact of the platform's construction, that this "current rate" does have a very tangible monetary effect once a day, at a time known to everyone in advance.

Those fundamentals rules are established and implemented by major exchanges throughout the world, so introducing e.g. random clearing time would be a hack. What we need is a proper solution.

Proper solution is a liquid market, with many market making bots competing with each other. This way, it would not be possible to move market too much without simply losing money.

But, still, until the market becomes liquid (I'm working on that too, and will be providing reference market maker bot code for everyone to use for free), some of your suggestion makes sense: e.g. they influenced my previous two proposals.

If anyone else have any other ideas, let's discuss.

[Stephen Gornick]

If anyone else have any other ideas, let's discuss.

Expanding the protection of two-factor authentication so that each withdrawal request requires a new OTP to be entered would help improve security for ICBIT.

Without that, there still is the risk that using ICBIT from a compromised system can result in unauthorized withdrawal:

A plea to exchanges ... lets do 2 factor right!
 - http://bitcointalk.org/index.php?topic=109424.0

[Agent Provocateur]

wow, another deduction turned into a profit within a single second. thanks for that, whoever you are!

[Fireball]

another deduction

What does that mean?

[Stephen Gornick]

another deduction

What does that mean?

It probably means someone short was just about to get dinged for the daily variation margin at the prevailing price of around $10.50, when right before the clearing 250 BUZ2 positions were sold, bringing the "last" trade prior to clearing all the way down to $10.10.

So instead of that party with the short position seeing a negative variation margin, a positive one resulted instead.

Of course, this was interesting because shortly after the clearing, trading resumed at the $10.57 level.  This makes some nice profits for whomever bought just minutes earlier below $10.50.

This occurs pretty regularly right before clearing time.  I keep forgetting to put in some lowball bids right before clearing so I can get me some of these BUZ2's at that daily discount.

[Agent Provocateur]

another deduction

What does that mean?

as outlined before it is a depth "problem", more customers is what you need

[Fireball]

as outlined before it is a depth "problem", more customers is what you need

Ah, yes, we're working on that.

[Agent Provocateur]

as outlined before it is a depth "problem", more customers is what you need

Ah, yes, we're working on that.

yes,yes,yes!

[picobit]

And again today someone is hiding the market depth with small entries.  We really badly need a way to see the full depth.  Anyway, even if it means entering a cryptic url and getting a json back :-)  But a nice table would of course be nice....

[smickles]

Is the Web trading down? I can see the chart and the framework, but no data, not even my margin.

[smickles]

Is the Web trading down? I can see the chart and the framework, but no data, not even my margin.

seems to have resolved

[Fireball]

Is the Web trading down? I can see the chart and the framework, but no data, not even my margin.

seems to have resolved

I didn't have any issues reported, so it must have been a connectivity issue.
Minor platform update is scheduled for today (after clearing), I will provide more detailed info when it happens.

[Stephen Gornick]

We've continuously ongoing problems with manipulation shortly before the cut-off at 20:00

With it being exactly one month to settlement now, I would think the gap between the spot price and BUZ2 would start to narrow.  It is instead growing, the BTC/USD is going up and at the same time BUZ2 is going down.
 - https://icbit.se/BUZ2

Anyone have thoughts as to why BUZ2 is bifurcating from BTC/USD, ... more than 10% below the spot market price now?

[starik69]

Looks like someone has opened too many shorts around 10 and now holding the market to avoid losses.

[picobit]

Looks like someone has opened too many shorts around 10 and now holding the market to avoid losses.

That is of course a loosing strategy, unless the spot BTC prices falls between now and 15. dec.  The rest of us can try to benefit from his strategy. :-)

[killerstorm]

I was developing my own derivative trading platform a while ago, and now as people are actively trading USD/BTC futures on ICBIT, I wonder if there is any interest for other kind of derivative contracts.

Let's call them "capped non-deliverable forwards":

• capped: there is a hard limit on maximum profit/loss
• non-deliverable: settled in bitcoins, exactly like ICBIT futures contracts
• forwards: there is no such thing as variation margin and there is no such thing as margin call. Initial margin is your maximum loss.

So unlike futures, forward is essentially a contract between two parties, exchange does not need to manage it. And since they are capped and initial margin is required, there is no counterparty risk.

However the downside is that initial margin might be considerably higher than you have with ICBIT futures. (But it's up to market players, it might be tiny if they are OK with small profit caps.)

Also since forward is settled between two parties it can be done via multisig escrow, so there is no need to trust exchange your money, at least in theory.

(I'm sorry if it looks like an advert for my non-existent service, but I was discussing this topic with Fireball before he made ICBIT and I wonder what people think about it now. That's all.)