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

[Fireball]

And to address the third problem, the problem of liquidity, which concerns many traders of the exchange.

It's very obvious that the liquidity currently is the most important problem which holds further growth of the market. And not only that. It makes risk management particularly difficult, and with the constantly rising USD/BTD rate the sell side of the book gets bought out in a few seconds when sell orders appear.

As a drawback, these days we have to utilize the worst case scenario expressed on this page, because the exchange can pay one side only as much money as the other side has. We often just can not margin call users against the market because the sell side of the order book is empty. This scenario means that profitable (only profitable!) traders realize some profit from their existing position (e.g. if they had some long BUU3 contracts, some of them will be sold, but no fees will be deducted).

I understand it is annoying, especially for greedy traders who are not satisfied with the (rather big) profit they got and complain that they want more :-)

There is a solution for this problem and it's about bringing liquidity to the market, by means of market makers, who would provide liquidity, hedge on the spot market (gox and icbit's one when it grows enough) and get profit from the price difference between spot and futures.

Market makers pool thread is here: https://bitcointalk.org/index.php?topic=169908.0

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[Fireball]

Until the market making situation is improved, we have to close a lot of open interest today in the BUM3 contract. The BTC/USD rate goes on, and resources of short traders are limited now.

To make the internals of the so-called worst case scenario (https://icbit.se/margincall ) fully transparent and clear:

1. The system looks whether any of the traders crosses negative balance.
2. If yes, the optimal price is calculated per every trader who is in debt. The optimal price means that the user in debt results in 0 BTC on his account.
3.1. These trades are executed either by existing orders in the market (if there are suitable orders), or if there are no suitable orders
3.2. These trades are forcefully executed against traders holding opposite positions. Only those users are selected, who currently hold those contracts, and those, who have made profit by trading this type of contract. Effectively, this is a profit cap. Of course, those "good" traders don't get any trading fees for such trades.

I would like to stress out the fact that noone ever goes with a loss after such forceful settlement. It is a profit cap, and until there is enough liquidity on the market, and until the BTC rate volatility remains that high, it's the only way to survive.

Thank you for understanding. Please help spread the word about market making to help fight these forceful settlements.

[picobit]

What on Earth happened at 10:13 this morning

At 9:02:58, I have sold 550 BUM at 150$, this looks like a forced close (the majority of my contracts ).  Then something weird happens: At 10:13:38 I have apparently sold another 550 BUM3 at 155$, and then bought them all back at 10:15:20 at the same price.  550 contracts is somewhat more than I had, so I have been short for 2 minutes.  And why did this result in TWO variation margin lines in the log at 10:13:38?  Was this an erroneous forced closure, or something like that?

I know this extra "clearing" should not affect my profit, since the real clearing happened soon after, regaining the lost money.  But the two variation margin lines worries me a bit, since something clearly went wrong I may have taken a loss for all 550 contracts, and not just for the 300-something that I actually owned?


Edit: spelling.

[Fireball]

https://twitter.com/icbit_se/status/320632134815584257

Changes to the rules (effective from 04/08): 2 clearings per day instead of one, clearing price calculated as last hour average.

At what time will the new clearing be?  08:00 UTC?

Just to clarify, as other proposed options did not get enough justification by traders, 08:00 UTC is going to be the second clearing time. So tomorrow 08:00 UTC second clearing will happen already.

[Fireball]

Due to extreme volatility we are going to increase initial/maintenance margin for "long" side, starting with BUJ3.
Please add more funds to be able to withstand that increase.

[starik69]

Non informative. Would be good if you post exact numbers.

[Fireball]

Non informative. Would be good if you post exact numbers.

The change will go into effect after the clearing. The exact value is going to be determined, to be safe enough not to cause the margin-calls crash.

[alberthendriks]

Hey Fireball,

Do you need some help? I'm not sure if that question has been answered before in the previous 39 pages, I didn't read through them. Please check my request at https://bitcointalk.org/index.php?topic=172378.msg1793556

I can imagine you're already earning enough to not need to share anything, but I thought it's worth a shot anyway.

[Fireball]

Hey Fireball,

Do you need some help? I'm not sure if that question has been answered before in the previous 39 pages, I didn't read through them. Please check my request at https://bitcointalk.org/index.php?topic=172378.msg1793556

I can imagine you're already earning enough to not need to share anything, but I thought it's worth a shot anyway.

I really do. I'm not earning anything from this yet, all profit went to settle debts of non-paying users and stabilize the market. Risk management improves, attracting market makers, etc etc to make this thing really profitable (as the volume itself is great). After that's done, the fees would be significantly reduced further.

I PMed you.

[davidoski]

Hi,

what is the current policy regarding margin requirements? I have position of 161 contracts, which is currently worth 5.7454 BTC and the initial margin is 2.98 BTC.



2.98 out of 5.7454 is 51%, which means that the leverage is only 1:2, not 1:10 as stated on the ICBit futures specification page.

[Ichthyo]

this might be the consequence of the increase in margin requirements, which Fireball anounced just some messages above?

Due to extreme volatility we are going to increase initial/maintenance margin for "long" side, starting with BUJ3.
Please add more funds to be able to withstand that increase.

[picobit]

He announced recently that he would increase the margin for long positions, looks like that is what happened.  I guess he got tired of paying for short users going bankrupt during the rapid rise, and wanted to avoid the same for long users during the unavoidable crash.  Now the crash has come, and it was not bad at all (only four days of value increase wiped out.  FOUR DAYS, hmm this was not a crash but a minor correction).

Anyway, ICBIT has not really worked during these last crazy weeks, as nobody in their right mind would go short (even if you think it is a bubble, "the market may remain irrational longer than you can remain solvent").  During most of the spring, I suppose the bulls have lived from the arbitrageurs, and the arbitrageurs have profited from the contango the bulls caused (use USD, buy BTC on an exchange, short the same amount of USD on ICBIT, profit: the difference in BTC, same amount in BTC regardless of what happens to the rate).

But the contango went away, either because ICBIT could not move fast enough or because nobody wanted to take the role as arbitrageur - or no-one wanted to pay a large contango and then be forcibly closed.  If things settle now, and this correction cause the price to rise slower (or even fall - was this the signal to "the long slide to 20$" ?) then ICBIT should begin functioning better again.  And to return on topic: then I assume Fireball would reduce the margin requirement, so ICBIT becomes attractive again.  The current margin requirement may be necessary, but it really sucks, and I doubt that I will increase my position under these conditions (not that I have been able to do so when I tried - no-one wanted to sell anyway)

[zebedee]

Hi,

what is the current policy regarding margin requirements? I have position of 161 contracts, which is currently worth 5.7454 BTC and the initial margin is 2.98 BTC.



2.98 out of 5.7454 is 51%, which means that the leverage is only 1:2, not 1:10 as stated on the ICBit futures specification page.

Complete, informative, corner-case covering, correct specifications are not icbit's strength. You'd know that reading this thread.


Given gox-lameness induced volatility icbit is trying hard to retain relevance of its futures that, 60 percent or more of the time, are out of range. That's when they're not closing out positions abruptly.


Given this, I think their fees are outrageous. Their fees are criminal even for an impeccable outfit. But free market and all that, as long as people keep playing they have little reason to change their sloppiness.

[picobit]

Given this, I think their fees are outrageous. Their fees are criminal even for an impeccable outfit. But free market and all that, as long as people keep playing they have little reason to change their sloppiness.

The fees may be a problem for daytrading, but if you hold a position a few days they will hardly make a scratch in your profit (or loss).

[StevenPine]

Hello,

I just posted here: https://bitcointalk.org/index.php?topic=173928.0

Our margins are covered but icbit admin is currently refusing to release funds. Is anyone else having the same issue?

[Fireball]

Hello,

I just posted here: https://bitcointalk.org/index.php?topic=173928.0

Our margins are covered but icbit admin is currently refusing to release funds. Is anyone else having the same issue?

An official comment:

With the situation at Mt.Gox, we are unable to manage risks in full as the spot price is basically unknown. Margin requirements were temporary increased, so withdrawal requests which would normally be processed are pending now (because otherwise they may not be able to sustain payout requirements of a BTC/USD-4.13 contract due to settle in a couple of days).

We have to care about both sides of the market, and will gladly reduce margin requirements as soon as the market stabilizes (at least opens).

[StevenPine]

Hi Fireball,

Thank you for your fast response. Me and my partner are, overall, very happy with our experience on icbit.se. I am continuing in the other thread (since my understanding is that threads can be edited by their owner -- if a third party wants to start a 'neutral' thread i'd be happy to move discussion over there. Either way, I would prefer if we could keep discussion in one central location for clarity and reference.

Basically, I am not understanding how you can freeze accounts and decide that margin requirements are being changed ad hoc? That seems to violate the basic agreements under which we agreed to risk.

[Fireball]

Hi Fireball,

Thank you for your fast response. Me and my partner are, overall, very happy with our experience on icbit.se. I am continuing in the other thread (since my understanding is that threads can be edited by their owner -- if a third party wants to start a 'neutral' thread i'd be happy to move discussion over there. Either way, I would prefer if we could keep discussion in one central location for clarity and reference.

No, I can edit only my own posts here and anywhere else on this forum. I'm not a forum moderator.

[StevenPine]

thanks for the forum edit clarification.


Fireball, please, what are the current margin conditions and when will you be performing the next clearance?

[killerstorm]

It looks like I was right that 'traditional' futures do not work so well with Bitcoin.

I gotta build my own exchange with blackjack and hookers...

Err, I mean with capped forward contracts and no margin calls.