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Author Topic: ICBIT Derivatives Market (USD/BTC futures trading) - LIVE  (Read 88487 times)
random_cat
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March 29, 2013, 09:26:25 PM
 #681

I certainly welcome a more defined clearing process and avoidance of ad hoc clearing.
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Super T
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March 29, 2013, 11:27:59 PM
 #682


I would also like to see the avoidance of ad-hoc clearing, I see a few options:

1. Do nothing.

2. Guarantee no unscheduled clearing, with no other changes.

3. Guarantee no unscheduled clearing AND increase the frequency of scheduled clearing (e.g. to twice per day).

4. Allow unscheduled clearing, but with additional controls, for example requiring a minimum spot price time above/below threshold price range before clearing is triggered, with plenty of notifications in advance etc.

5. Others... let's hear em


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March 30, 2013, 12:32:42 AM
 #683

...and if this decline lasts more than 8 hours, then an additional clearing would be adequate IMHO. (This would allow 2 additional clearings per day)

Ichtyo - 8 hours is a huge risk. Margin requirements should be significantly increased to allow waiting for such long time. We are doing really strict risk management now, it's the only way to remain honest and pay everyone what they earned.

Indeed, we appreciate that you care for managing the risks.
Could you please elaborate a bit about what exactly the risks are in such a situation?

Let's assume that there was a real crash on the spot market, so futures are now very much in contangio.
I was under the impression that the margin requirements and the size of the trading range are chosen in a way, that every move within the trading range can still be covered by the margin (used as collateral). Is this assumption still correct?

Then, in our hypothetical scenario, for each loosing long position there is an corresponding winning short position. Thus, in case the trader being long doesn't provide additional collateral or is unable to close his position (since no one wants to buy at a rate way higher than spot), the often mentioned "worst case" automatism kicks in: the long trader's position will be closed against some other suitably winning position.

Is this the risk you are referring to? So this would basically be a risk for the trader, but not endanger the balance of the platform, correct? In an indirect way, it is harmful to the platform, since the winning trader will be unhappy or even loosing his hedging mechanism. Personally, I think this risk for me as trader is acceptable, since it is well known and somewhat comparable to a general counterparty risk.


and btw, thanks for clarifying this situation regarding the additional clearings!
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March 30, 2013, 02:43:14 AM
 #684

The other worth mention thing is that sometimes some small newbie order is fulfilled at unrealistic price - much lower/higher than actual best price. If that happens shortly before the clearing this price will be taken as the base price for the clearing and might force many margin calls on much bigger players.

In other scenario it is possible to manipulate variation margins by doing the same intentionally. It can be done currently as well but more often clearings mean that the risk of it is increased. For example a small order for 1 contract fulfilled shortly before the clearing would affect margins of all traders with thousands of contracts.

I think much more reliable would be to take as the basis price for the clearing not the last price before the clearing but some average during the day or simply drop the most extreme prices to avoid this problem. Then clearings twice a day would not increase the risk of margin calls caused by a single small mistaken/newbie/intentional order.
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March 30, 2013, 07:15:21 AM
 #685

My proposition is

1. remove trading range at all or
2. provide clear rules for "additional clearings" which change the trading range so users can calculate the risk

If you do additional clearings arbitrarily you effectively change the trading range at will. Many people have margin calls that they wouldn't have if additional clearing was not done. In effect they feel that arbitrarily done clearing "margin called" their accounts. No clear rules for additional clearings justifies their feelings.

Allright, proposal nr.2 accepted. I will outline the draft of the rules soon.

currently, the additional clearings are a scam.

I have lost all of my financial confidence in icbit - this is no less than the second major round of huge price "manipulation" this time fueled by the apparently new automated margin call execution - This is definitely resulting in losses to smaller investors. this coupled with the "additional clearings put investors at far more risk than intended - this is theft. The nonchalant attitude of icbit suggests they have something to gain from this.

I believe that I can no longer trade at icbit. The lack of concern for investors' money is flagrant and alarming.
Agreed on the lack of concern for transparency and professionalism.  I pointed out how the settlement price determination wasn't per-contract for March, only to be ignored.  Future contracts have not been updated to reflect actual settlement process.  Settlement price determination is done by "taking a screenshot".  Fees are too high.  I'm cutting out too.
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March 30, 2013, 09:29:55 AM
 #686

Settlement price determination is done by "taking a screenshot".

The 24 hour weighted average price (VWAP) showing on Mt. Gox.com website is what gets used for settlement. [Edit: The 24 hour VWAP at the "largest exchange" is what gets used for settlement, but that just happens to be Mt. Gox, for now.]

The settlement occurs at the clearing time (20:00 UTC) on the settlement date (e.g., April 14th, 2012 for BUJ3).   That's from the contract, combined with general instructions from the page describing how ICBIT futures work.  

As far as that number being obtained from a "screen shot", every trade at Mt. Gox is logged and is publicly available.  From that data, you can calculate the 24 hour VWAP yourself.  If you have reason to believe the VWAP grabbed at the time of settlement (20:00 UTC) is not accurate please raise that concern publicly as that would be a problem (as many merchants, traders, and others use that metric from Mt. Gox as well, ... though nobody else has raised concern about its accuracy.)

Of course, there needs to be just "one price" used for settlement at ICBIT.  And that price needs to be known at the time of that settlement day's clearing.   If you believe the use of this 24 hour VWAP is problematic, or whatever issue you seem to have with this metric being used, please clearly state your argument.   If I recollect it seems that you are saying you believe the 24 hour metric at 00:00 UTC (four hours after clearing) should be the metric used and not the number that existed at the time of the 20:00 clearing.  Am I understanding correctly where you believe the issue lies?  If not, please clearly describe what exactly is the particular problem you see with using the 24 hour VWAP that exists at the time settlement (& daily clearing) occurs.

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March 30, 2013, 06:49:31 PM
 #687

I really like the twice daily clearing at uniform intervals, both trading ranges 10%.
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March 30, 2013, 08:46:06 PM
 #688

currently, the additional clearings are a scam.

I wouldn't go so far as to say that it is a scam, but I believe it is at the very least deceptive practice and I would go so far as to say that it is a breech of contract.  The text on the site defined a trading session is 24 hours, with a maximum trading range of 10%. Fireball, could you provide the original text that was on the site before you updated so that it can be considered? 

I had contracts of BUJ3 with enough money in reserve to handle 10% movement, and had my finger on the button to add additional funds if the clearing proved to move the price down to a range that might put some of my contracts in jeopardy.  The clearing actually moved the price range center from 103 to 106, so I did not add additional funds. The manual clearing I believe moved the price range center to 95, causing a loss of a very large portion of my positions as the price went down to 86. I've since closed all of my positions at a great loss to myself as I've lost all confidence that this site will perform as it says it will without making things up as they go.

I feel that this manual clearing should not have happened according to the definitions laid out on the site at the time. I feel that the exchange did this as a CYA disregarding the fact this is not a provision set forth and agreed upon with its customers. Some sort of compensation is due.
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March 30, 2013, 09:14:46 PM
 #689

bV, you bought two weeks contract above 100 and the spot price fall to 75 - what other than forced closing of such positions you expected? Huh

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bV
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March 30, 2013, 09:27:19 PM
 #690

bV, you bought two weeks contract above 100 and the spot price fall to 75 - what other than forced closing of such positions you expected? Huh

Force closing only occurs if you do not have funds to cover the losses over dips. The advertised trading range per session is 10%, and I had enough funds to cover any dips in that range. Furthermore, I did not purchase most of those contracts above 100, that is the price they moved to, and your position moves to whatever the price is at each clearing. I had additional funds in my offline wallet, and would gladly have funded the account further to prevent closing of positions, but unfortunately the manual clearing was completely unexpected and gave no opportunity to do so.
starik69
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March 30, 2013, 09:46:28 PM
 #691

but unfortunately the manual clearing was completely unexpected and gave no opportunity to do so.
It was same unexpected as spot fall from 95 to 75. I cannot imagine how futures trader would not expect to loose almost all his overleveraged money on April contract in such circumstances. I think if someone plays high risk instruments with such volatility he must be happy that exchange ever not stopped operations at all.

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davidoski
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March 30, 2013, 10:01:10 PM
 #692

starik69, your personal views are completely meaningless in regard to futures clearing process. What is important is contract specifics laid out in the contract description. If there's nothing about "additional clearings to change the price range" there it means the breach of rules upon which the trader in opening his positions and calculates the risk it involves.

Now the "additional clearings" are mentioned in the trading session description so everybody can prepare for it and take into account that it can happen at any time making the price range wider. Daily price range is effectively illusory and it's better to assume it doesn't exist and the futures price may change as much as the spot price or even more at any time .
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March 30, 2013, 10:18:22 PM
 #693

@starik, the issue here is adherence to a contract.  To be respected in the world, you must adhere to your word.
starik69
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March 30, 2013, 10:26:55 PM
 #694

davidoski, J_Coin, when the good trader (who cares about his whatevercoins) is opening his positions and calculates the risk it involves he studies the history of the exchange he is trading on. And he discovers that "additional clearings to change the price range" already happened several times and the risk of repeating it exists whatever contract says.
Moreover, what competent futures trader can expect from his exchange in situation when market moves more than 20%? Sit still as nothing happened? Wait 20 hours till next clearing? Really? How you then define competence?  Grin

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davidoski
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March 30, 2013, 10:30:07 PM
 #695

EOT
bV
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March 30, 2013, 10:59:35 PM
 #696

it all depends on how you define overleveraged. I was not overleveraged adhering to the rules set forth by the exchange, which is my point
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March 30, 2013, 11:50:19 PM
 #697

But i think this is the fact that you were overleveraged to >20% move on spot market, and such moves and corresponding additional clearings already happened this month. So risk was real. An you have to accept it.

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zebedee
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March 31, 2013, 05:36:15 AM
 #698

Settlement price determination is done by "taking a screenshot".

The 24 hour weighted average price (VWAP) showing on Mt. Gox.com website is what gets used for settlement. [Edit: The 24 hour VWAP at the "largest exchange" is what gets used for settlement, but that just happens to be Mt. Gox, for now.]

The settlement occurs at the clearing time (20:00 UTC) on the settlement date (e.g., April 14th, 2012 for BUJ3).   That's from the contract, combined with general instructions from the page describing how ICBIT futures work.  

As far as that number being obtained from a "screen shot", every trade at Mt. Gox is logged and is publicly available.  From that data, you can calculate the 24 hour VWAP yourself.  If you have reason to believe the VWAP grabbed at the time of settlement (20:00 UTC) is not accurate please raise that concern publicly as that would be a problem (as many merchants, traders, and others use that metric from Mt. Gox as well, ... though nobody else has raised concern about its accuracy.)

Of course, there needs to be just "one price" used for settlement at ICBIT.  And that price needs to be known at the time of that settlement day's clearing.   If you believe the use of this 24 hour VWAP is problematic, or whatever issue you seem to have with this metric being used, please clearly state your argument.   If I recollect it seems that you are saying you believe the 24 hour metric at 00:00 UTC (four hours after clearing) should be the metric used and not the number that existed at the time of the 20:00 clearing.  Am I understanding correctly where you believe the issue lies?  If not, please clearly describe what exactly is the particular problem you see with using the 24 hour VWAP that exists at the time settlement (& daily clearing) occurs.
I've been through it before, not going to rehash it all.  Basically a day doesn't end at 8pm is my issue - the contract states a day, and doesn't state 8pm.

I made money off the interpretation, so I'm not sore about it.  I just think it's wrong.
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April 01, 2013, 05:52:33 PM
 #699

currently, the additional clearings are a scam.

I wouldn't go so far as to say that it is a scam, but I believe it is at the very least deceptive practice and I would go so far as to say that it is a breech of contract.  The text on the site defined a trading session is 24 hours, with a maximum trading range of 10%. Fireball, could you provide the original text that was on the site before you updated so that it can be considered? 

I had contracts of BUJ3 with enough money in reserve to handle 10% movement, and had my finger on the button to add additional funds if the clearing proved to move the price down to a range that might put some of my contracts in jeopardy.  The clearing actually moved the price range center from 103 to 106, so I did not add additional funds. The manual clearing I believe moved the price range center to 95, causing a loss of a very large portion of my positions as the price went down to 86. I've since closed all of my positions at a great loss to myself as I've lost all confidence that this site will perform as it says it will without making things up as they go.

I feel that this manual clearing should not have happened according to the definitions laid out on the site at the time. I feel that the exchange did this as a CYA disregarding the fact this is not a provision set forth and agreed upon with its customers. Some sort of compensation is due.


Thanks for being sane. I have to say, that previously we had many additional clearings, and this was not the problem.

I want to stress one specific fact, which clearly separates honest and dishonest behavior:
If an additional clearing followed by margin calls happened WITHOUT spot market movement into the same direction (or even worse, into different direction), then it's clearly an abuse.
If the spot market moves and additional clearing is done to adapt to changed conditions (and direction of futures price change corresponds to the spot market price change), then there is no dishonest behavior involved.

And every trader who trades futures must be well prepared and not over-leveraged. Because if spot market drops, and scheduled clearing happens, then your position would still be forcefully liquidated if margin was not enough.

It may sound strange from the exchange owner, but I strongly advise all of you to not overleverage. Trade with confidence, trade with safety. Leverage is a powerful mechanism, use it wisely.

However, I took your concerns and we are trying to abstain from additional clearings now. Instead, the proposed move to the 2 clearings per day would be beneficial.

As for the website contents, you can check archive.org for a trusted source, but I didn't rewrite anything, just added a clause about additional clearing possibility.

Margin trading platform OrderBook.net (ICBIT): https://orderbook.net
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April 01, 2013, 06:32:17 PM
 #700

I want to stress one specific fact, which clearly separates honest and dishonest behavior:
If an additional clearing followed by margin calls happened WITHOUT spot market movement into the same direction (or even worse, into different direction), then it's clearly an abuse.
If the spot market moves and additional clearing is done to adapt to changed conditions (and direction of futures price change corresponds to the spot market price change), then there is no dishonest behavior involved.

I would disagree with this point, but note that I used the word deceptive and not dishonest. Though I do believe that you have something to gain by doing a manual clearing in that the exchange has reduced risk (this should not be disregarded, as risk is used as a financial instrument), my main point is that the trading range on the site and the definition of a trading session led many users to believe that they would at least have some time to react to >10% market moves.

It was grossly negligent on your part to implement this risk management solution without redefining a trading session and giving everyone with a contract notice and opportunity to object. Honestly, I still don't believe you should be able to do so without everyone's permission that is still in a contract with you. A trading session should not be defined outside the contract to begin with. This is a material part of the contract that was (and still is) omitted.

While I believe that negligence caused the entire loss that I endured, I don't think it would be realistic to hold you accountable for the entire realized loss for the contracts. I'm actually not sure what would be fair in this case, and I'm open to suggestions from the community, but at the very least the fees should be returned or credited towards future volume.
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