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

[StevenPine]

We've had large long positions closed without being fully compensated because the margin was not increased. And yet now he is increasing the margin when it isn't in our favor, this is a clear case of bias on the part of the admin/fireball

[zebedee]

We've had large long positions closed without being fully compensated because the margin was not increased. And yet now he is increasing the margin when it isn't in our favor, this is a clear case of bias on the part of the admin/fireball

huh? I'd be very happy right now they were closed out. I'm sure they'd be worth a lot less now.

[zebedee]

It's hard to justify treating someone differently just because they left BTC on the exchange that you can seize.

Moral of the story : if there's any chance you might want out, don't leave excess coins on icbit.

[picobit]

We've had large long positions closed without being fully compensated because the margin was not increased. And yet now he is increasing the margin when it isn't in our favor, this is a clear case of bias on the part of the admin/fireball

Yes, we were lucky - at least I count myself lucky that my large, long position was largely closed a few days before the crash.  The profit I lost was less than the loss I would have incurred now (I would have been wiped out).

Of course it is not good at all that Fireball changes the rules during the game.  On the other hand, it is probably better than ICBIT just closing with all our funds being lost.  Remember, we all get angry when our profitable position is closed or we are margin called, but how many of us would leave a negative account alone (and perhaps even open a new one), leaving Fireball with the loss. It is likely that our combined wallets at ICBIT exceeds his private funds, and he also has to make an effort at staying solvent.  We have chosen to gamble our bitcoins on an anonymous, unregulated website.  We have to factor that risk into our risk management.  But that being said, Fireball should be more specific in his descriptions about what he is allowed to do in a crisis.

Disclaimer: I am not in any way associated with ICBIT, but I have made significant (by my modest standards at least) profit on the site, which probably gives me a positive bias.  I currently have money on the site that I would withdraw if I could, but I understand and (reluctantly) accept that they are frozen until the dust settles.

[Fireball]

Hardware maintenance, sorry for downtime.


Bytheway, we are enlarging our infrastructure to include more servers and ultimately provide interruption-less service.

[Fireball]

20:00 UTC clearing will take a bit longer than usual due to contracts expiration.

[Fireball]

Final settlement report for three contracts:

BTC/USD-4.13 (BUJ3)
Settlement price as of 24h volume weighted average price from MtGox: $98.94082
Total volume of the contract: $754550
Open interest by the moment of settlement: 5005

GOLD-4.13 (GDJ3)
Settlement price $1507.0 / $98.94082 = 15.23 BTC
Total volume of the contract: 119 contracts
Open interest by the moment of settlement: 17

OIL-4.13 (CLJ3)
Settlement price $90.72 / $98.94082 = 0.9169 BTC
Total volume of the contract: 187 contracts
Open interest by the moment of settlement: 17

Everyone got paid in full during the final settlement. As the OIL and GOLD contracts show rather low volume, we are not introducing new contracts until more interest in trading them shows up.

Thank you for trading with us and sorry for all the turbulence during the crazy rate rise/fall days.

[Ichthyo]

20:00 UTC clearing will take a bit longer than usual due to contracts expiration.

...which brings up again the topic of gold and oil futures.

In the last time those futures were pretty much dead in the water. In case you did hold a position, there was basically just the option to hold until settlement. But we must concede that this situation became similar unfortunate for the BTC/USD futures. Right now, the only market that works is S&P.

On the other hand, the first batch of Gold and especially Oil was really interesting. They were always a bit illiquid, but they had their own specific behaviour and reacted to the movement of Gold and Oil, instead of just reflecting the BTC/USD rate.


Thus my proposal would be maybe to wait some time, until the BTC/USD development is back in a sane region, so that trading any BTC based future makes sense for both parties involved. And then to reconsider adding Gold and Oil again.

[papamoi]

Final settlement report for three contracts:

BTC/USD-4.13 (BUJ3)
Settlement price as of 24h volume weighted average price from MtGox: $98.94082
Total volume of the contract: $754550
Open interest by the moment of settlement: 5005

GOLD-4.13 (GDJ3)
Settlement price $1507.0 / $98.94082 = 15.23 BTC
Total volume of the contract: 119 contracts
Open interest by the moment of settlement: 17

OIL-4.13 (CLJ3)
Settlement price $90.72 / $98.94082 = 0.9169 BTC
Total volume of the contract: 187 contracts
Open interest by the moment of settlement: 17

Everyone got paid in full during the final settlement. As the OIL and GOLD contracts show rather low volume, we are not introducing new contracts until more interest in trading them shows up.

Thank you for trading with us and sorry for all the turbulence during the crazy rate rise/fall days.

hi fireball
i ve pmed you

let me know if you can help

thanks

[Stephen Gornick]

Total volume of the contract: $754550

The exact same volume for the last two BTCUSDs?

Total volume for this contract is $754550.

Here's a summary of the settled contracts:

Dec 15, 2012: BTCUSD-12.12 (BUZ2) Total volume: $500,000, Final settlement: $13.4870
Mar 15, 2013: BTCUSD-3.13 (BUH3) Total volume: $754,550, Final settlement: $47.0764
Apr 14, 2013: BTC/USD-4.13 (BUJ3) Total volume: $754,550, Final settlement: $98.94082

Feb 15, 2013: GOLD-02.13 (GDG3) Total volume: 268 contracts, Final settlement: 65.0314 BTC ($1634.30 USD)
Apr 14, 2013: GOLD-04.13 (GDJ3) Total volume: 119 contracts, Final settlement: 15.23 BTC ($1507.0 USD)

Feb 15, 2013: OIL-02.13 (CLG3) Total volume: 1513 contracts, Final settlement: 3.8709 BTC ($97.28 USD).
Apr 14, 2013: OIL-04.13 (CLJ3) Total volume: 187 contracts, Final settlement: 0.9169 BTC ($90.72)

BUZ2 volume obtained from news release: https://plus.google.com/u/0/117990284188664727142/posts

[picobit]

Thus my proposal would be maybe to wait some time, until the BTC/USD development is back in a sane region, so that trading any BTC based future makes sense for both parties involved. And then to reconsider adding Gold and Oil again.

I tend to agree.  The first round of Gold futures were essentially gold futures.  There was a contango in Gold at the same time as there was a contango in BTC versus USD.  The second round were BTC futures traded in the currency "gold", a bit more complicated to figure out, but essentially just the same as BTCUSD.  There was constantly a backwardation corresponding pretty much to the contango in BTC/USD.  Gold futures probably only make sense in times where the BTC is pretty stable, and even then there would be a tendency to treat them as another BTC futures.

[Fireball]

Total volume of the contract: $754550

The exact same volume for the last two BTCUSDs?

Total volume for this contract is $754550.

Wow, what a coincidence!

[Fireball]

Proposed changes to the futures trading aimed to improve the trading process:

• Additional clearing happens automatically if the price hits the limit for N minutes (N may be 5, 10 or more minutes - to be discussed).
• Margin calls are executed automatically against the market according to the existing 75% rule.
• Margin requirements (both initial and maintenance) would be different for long and short positions. The formula for margin requirements calculation will include contango/backwardation into account, so that if some traders drive the price away from spot price, they are guaranteed to have enough money reserved in case contango is reduced.
• Daily settlement price is going to be calculated as the last hour average
• Contract specifications will be united into one (with the only difference of settlement dates), so that e.g. BUM3, BUU3 would be the same spec, with different settlement dates. The contract specification may be amended, and a list of all amendments must be maintained along with the recent edition of the contract spec. Amendments may come into effect at least in the next trading session after announcement, but usually for big changes the waiting interval after announcement may be a few days.

Thanks to alpet and potential market makers who proposed one or more of these changes. Your help is really appreciated!

Please let me know your thoughts about this.

[Super T]

Fireball,

It's great to be getting the opportunity to discuss this stuff, my feedback below.

1. Additional clearing happens automatically if the price hits the limit for N minutes (N may be 5, 10 or more minutes - to be discussed).

There are two scenarios in which limits are typically locked:
1) During a spot price reversal, spot moves away from futures range and the range is trending TOWARDS the spot but is not able to move quickly enough.
2) During a bull/bear run, where the range is moving AWAY from the spot and speculation results in contango/backwardation reaching range thresholds.

Is the objective to solve one or both of these issues?

As for the proposed solution, it is not clear what "Price" is being referred to here, do you mean Mt Gox spot price, ICBIT "last" price, or some kind of VWAP?   

If basing on Mt Gox prices, this might be effective in times of trend reversal, but will not prevent limit locks during contango/backwardation stretching.

If basing on ICBIT prices, I would suggest using modified VWAP rather than last price to reduce the scope for manipulation, and I would also suggest any trigger times are measured in hours rather than minutes, again to reduce the scope for abuse.

Whilst limit-locked ranges are frustrating at times, the range ceilings/floors do provide a buffer against intraday volatility which is both useful and relevant in a futures market.  Nobody will benefit from changes which make 100% daily range movement possible if the primary outcome of this is increased counterparty default and contract liquidation.

2. Margin calls are executed automatically against the market according to the existing 75% rule.

Does this not currently happen?  I agree this should happen, if a holders margin is exhausted contracts should be auto-offered to market and either sold/bought at the best available price, or placed as an offer at the minimum level which will guarantee 0 counterparty loss.  If no-one picks up the distressed contracts, the corresponding contracts should be liquidated at some specified point (e.g. the subsequent clearing session).

3. Margin requirements (both initial and maintenance) would be different for long and short positions. The formula for margin requirements calculation will include contango/backwardation into account, so that if some traders drive the price away from spot price, they are guaranteed to have enough money reserved in case contango is reduced.

This needs to be thought through very carefully.  A blanket rule to automatically raise margin requirements because of increased backwardation/contango could have the effect of moving innocent contract holders into negative margin and possible liquidation, even if they are on the gaining side of a contract (!).  This could potentially be mitigated if such a margin adjustment were programmed to occur at clearing after unrealised P/L has been transferred to balance (and then used to refil margin), but I suspect that is not what is being proposed.

4. Daily settlement price is going to be calculated as the last hour average

This is far better than using last trade price. However, if there has been no trade in the past hour the "last second single trade manipulation" would appear to remain possible.  To prevent this could you ensure the last hour average somehow apportions appropriate "weight" to periods in which no trades have occurred (e.g. because ranges are limit locked).

5. Contract specifications will be united into one (with the only difference of settlement dates), so that e.g. BUM3, BUU3 would be the same spec, with different settlement dates. The contract specification may be amended, and a list of all amendments must be maintained along with the recent edition of the contract spec. Amendments may come into effect at least in the next trading session after announcement, but usually for big changes the waiting interval after announcement may be a few days.

Cool.

[picobit]

I think these are all good ideas - except for the first point.  

On one hand, it was a problem during the rally (and probably also during the crash) that ICBIT had difficulties following the movements of the market - but two daily clearances must have helped.  On the other hand, during the many "mini-crashes" leading up to the big crash, the market moved far down for an hour or so, and then moved back up again.  In these cases, the lack of clearing gave considerable stability to ICBIT compared to the CFD that 1broker was having at the time, where most long positions were liquidated in those situations.  

Also, I would fear that market manipulation would be easier for big players: they can almost trigger a clearing "on demand".  Open a huge position at the end of the trading range during a "sleepy" period, and force a lot of people out of the market.

[random_cat]

Proposed changes to the futures trading aimed to improve the trading process:

• Additional clearing happens automatically if the price hits the limit for N minutes (N may be 5, 10 or more minutes - to be discussed).

This makes no sense as proposed.  Are there range limits or not?  Pick one.

Given the thin nature of the market I can understand a desire to prevent a certain sort of manipulation via range limits.   If the desire is to
retain limits, then perhaps the limits (as well as margin requirements) should be based on historical volatility of spot.  Unfortunately the
options market is now thin with extremely wide spreads.

More sessions ending at previously scheduled times is a better choice (and allows for scheduled market down time).

If/when there is sufficient maker, why have limits at all?

In any event, note that a lower bound on the probability of an arbitrageur missing a margin call in any given session of a fast market is given by
http://latex.codecogs.com/gif.latex?\sum_{c=0}^{R-1}e^{-0.1N}(0.1N)^{c}/c!
where R = required number of confirmations for a deposit (R>0).   Please choose R and N carefully to avoid dysfunction.

• Margin requirements (both initial and maintenance) would be different for long and short positions. The formula for margin requirements calculation will include contango/backwardation into account, so that if some traders drive the price away from spot price, they are guaranteed to have enough money reserved in case contango is reduced.

I hope this is published for trader review.   Something fixed with a varying (as often as per session) table of margin factors would be excellent.

[Ichthyo]

I too share the concerns regarding additional clearings.
What exactly to you want to achieve with those?


As long as the limits are not moved, all positions are covered (not entirely true, but roughly speaking). The market might go dead, but no harm is done. But whenever the limits are moved, the probability of forced liquidations is increased. Thus, why should we strive at increasing the speed of possible adjustments to the trading limits?

We have now two clearings per day (correct?).
Even in case of a crash of the spot market, this gives a moderate adjustment rate.

If there is really the need for additional adjustments, then these should be triggered by the spot rate's movement solely (never by the futures). And there should be a relation to the absolute distance between the trading range and the current spot rate.

In the past, we had several times a stable market situation, where the spot rate was outside the futures trading range, due to contango or backwardation. Only when the spot moves significantly and stays at the new position for more than one trading session, plus when additionally the futures market is dysfunctional (e.g. only bids or only asks, stacked to the limits) -- only then a rule for additional clearings seems indicated.

[Ichthyo]

on a second thought....

why not using the shape of the futures market to a greater extent?

The rule would be: whenever the market becomes totally loopsided, i.e one side of the orderbook is empty within the trading range, and the other side is stacked with orders up to the very limit of the range.


When this condition is met, then the market needs help, e.g. one additional clearing per day.
But if this condition is not met, then there is no necessity for any intervention.

The whole point of futures is that they represent a bet on a future situation.
Thus, if the BTC spot crashes to $30 right now, of what relevance is this for a future due next september? If market participants still feel fine trading (both buying and selling) them at $150, then everything should be fine. Only if everyone wants to get out of their positions, but can't due to the trading range, only then an intervention seems adequate.

[Fireball]

on a second thought....

The rule would be: whenever the market becomes totally loopsided, i.e one side of the orderbook is empty within the trading range, and the other side is stacked with orders up to the very limit of the range.


When this condition is met, then the market needs help, e.g. one additional clearing per day.
But if this condition is not met, then there is no necessity for any intervention.

In fact, that's exactly what I described. If the price is "pushing" into one of the limits (which means that one side of the orderbook is empty AND another one contains offers at the best possible price within the trading range), and this situation is not intermittent (hence the N minutes rule), then it's obvious that the traders want range extension (usually, exchanges raise margin requirements after that), and an additional clearing should happen.

N may be considerably long, like, 15 or 30 minutes to prevent manipulation possibility.

[Ichthyo]

In fact, that's exactly what I described. If the price is "pushing" into one of the limits (which means that one side of the orderbook is empty AND another one contains offers at the best possible price within the trading range), and this situation is not intermittent (hence the N minutes rule), then it's obvious that the traders want range extension (usually, exchanges raise margin requirements after that), and an additional clearing should happen.

Thanks that clarifies a lot.
Probably we were all way too much focussed on the movement of the spot rate