Exchanges must have circuit breakers

ascent

newbie

Activity: 56

Merit: 0

Quote from: indicasteve on June 21, 2011, 08:08:25 AM

>10 percent in any 12-hour period: projected 1 hour halt

>20 percent in any 12-hour period: projected 2 hour halt

>30 percent in any 12-hour period: projected close until noon the following day

The bitcoin market, due to its immaturity, will inherently be volatile. If there were circuit breakers in place, in would have to be far in excess of 10 percent. Perhaps something along the lines of 20 percent in a 5 minute period, or 50 percent in a 30 minute period.

More importantly, if such circuit breakers were implemented, they must be publicly stated in the exchange's rules, and participants can evaluate the rules in place by the various exchanges in making a decision on which exchange to use.

indicasteve

full member

Activity: 140

Merit: 100

I found this old snippet of how LL handles their circuit breakers on their exchange...

LindeX Exchange ‘Circuit Breakers’

In addition, effective immediately, we are establishing “circuit breaker” trading halts based on movement (positive
or negative) of the average exchange rate in any given day, as follows:

>10 percent in any 12-hour period: projected 1 hour halt

>20 percent in any 12-hour period: projected 2 hour halt

>30 percent in any 12-hour period: projected close until noon the following day

BTC Economist

member

Activity: 112

Merit: 10

Quote from: speeder on June 21, 2011, 07:11:47 AM

I think if someone want to crash the market with his own money, he has the right to do so.

We do not need circuit breaker, we only need MtGox to have a system to figure things.

And also a system to ask confirmations for bizarre transactions, to avoid stuff like happened on Japan (one company intended to sell 1 share for 660k yen, and instead sold 660k shares for 1 yen, crashing the market and blaming the crap exchange interface... that resulted in a 40 billion USD loss by the way)

He would still be able to crash it if he wanted to. There would just be a pause after the market started to fall, exchange would verify the account was not hacked and was the actual user, then resume the crash.

mike_something

newbie

Activity: 6

Merit: 0

Quote from: speeder on June 21, 2011, 07:11:47 AM

I think if someone want to crash the market with his own money, he has the right to do so.

Possibly true, but it's less likely anyone would want to do this with their own money. So if there is a trade like this it's more likely to be a problem than a genuine trade.

Dimsum

member

Activity: 82

Merit: 10

If any of you were watching the Mt Gox live TV interview yesterday, you will know that Mark was asked this question - If they were implementing an AUTOMATED system to prevent the market crashing. Mark said that they are implementing something, but if there is a sharp rise or fall it would alert him via text message then he can evaluate the situation and freeze if necessary.

To me that is just very poor - since there is still some human intervention and therefore delay, there is always a chance that something will slip through while the damage is being done.

Overall I found their interview to not answer any real meat and substance based on what Mt Gox suffered.

speeder

hero member

Activity: 994

Merit: 501

PredX - AI-Powered Prediction Market

I think if someone want to crash the market with his own money, he has the right to do so.

We do not need circuit breaker, we only need MtGox to have a system to figure things.

And also a system to ask confirmations for bizarre transactions, to avoid stuff like happened on Japan (one company intended to sell 1 share for 660k yen, and instead sold 660k shares for 1 yen, crashing the market and blaming the crap exchange interface... that resulted in a 40 billion USD loss by the way)

chad

newbie

Activity: 28

Merit: 0

Quote from: kokjo on June 21, 2011, 06:55:04 AM

Quote from: chad on June 21, 2011, 06:45:27 AM

Quote from: kokjo on June 21, 2011, 06:39:40 AM

Quote from: chad on June 21, 2011, 06:23:51 AM

Quote from: BTC Economist on June 20, 2011, 06:11:17 AM

After any unusual drop or rise in value, a circuit breaker must be implemented.

Reads to me that as soon as there is an "unusual" change in the price, then trading should be stopped. i.e. the suggestion of the OP is that the trigger is the higher than usual price fluctuations.

This is the definition of limit up / down.

If there is suspected fraud then that is another matter altogether.....My point is that the trigger can not ONLY be price up/down.

its only a limit for a short period of time. for the things to get verifyed. and checking for hackers, then the market resume.
of cource there are many ways to cheat, they should all be detected by the circuit breaker.

So how would one determine, based ONLY on price movement alone, "in a short period of time" that the price movement is due to fraudulent activity and not natural market conditions?

when a really huge price movement happens, things should be CHECKED! mtgox does not only relay on the price. magicaltux have backstage access the site! he can look at all the accounts, and find out if something unusual has happend.

I think we are saying the same thing with different semantics.

kokjo

legendary

Activity: 1050

Merit: 1000

You are WRONG!

Quote from: chad on June 21, 2011, 06:45:27 AM

Quote from: kokjo on June 21, 2011, 06:39:40 AM

Quote from: chad on June 21, 2011, 06:23:51 AM

Quote from: BTC Economist on June 20, 2011, 06:11:17 AM

After any unusual drop or rise in value, a circuit breaker must be implemented.

Reads to me that as soon as there is an "unusual" change in the price, then trading should be stopped. i.e. the suggestion of the OP is that the trigger is the higher than usual price fluctuations.

This is the definition of limit up / down.

If there is suspected fraud then that is another matter altogether.....My point is that the trigger can not ONLY be price up/down.

its only a limit for a short period of time. for the things to get verifyed. and checking for hackers, then the market resume.
of cource there are many ways to cheat, they should all be detected by the circuit breaker.

So how would one determine, based ONLY on price movement alone, "in a short period of time" that the price movement is due to fraudulent activity and not natural market conditions?

when a really huge price movement happens, things should be CHECKED! mtgox does not only relay on the price. magicaltux have backstage access the site! he can look at all the accounts, and find out if something unusual has happend.

chad

newbie

Activity: 28

Merit: 0

Quote from: kokjo on June 21, 2011, 06:39:40 AM

Quote from: chad on June 21, 2011, 06:23:51 AM

Quote from: BTC Economist on June 20, 2011, 06:11:17 AM

After any unusual drop or rise in value, a circuit breaker must be implemented.

Reads to me that as soon as there is an "unusual" change in the price, then trading should be stopped. i.e. the suggestion of the OP is that the trigger is the higher than usual price fluctuations.

This is the definition of limit up / down.

If there is suspected fraud then that is another matter altogether.....My point is that the trigger can not ONLY be price up/down.

its only a limit for a short period of time. for the things to get verifyed. and checking for hackers, then the market resume.
of cource there are many ways to cheat, they should all be detected by the circuit breaker.

So how would one determine, based ONLY on price movement alone, "in a short period of time" that the price movement is due to fraudulent activity and not natural market conditions?

kokjo

legendary

Activity: 1050

Merit: 1000

You are WRONG!

Quote from: chad on June 21, 2011, 06:23:51 AM

Quote from: BTC Economist on June 20, 2011, 06:11:17 AM

After any unusual drop or rise in value, a circuit breaker must be implemented.

Reads to me that as soon as there is an "unusual" change in the price, then trading should be stopped. i.e. the suggestion of the OP is that the trigger is the higher than usual price fluctuations.

This is the definition of limit up / down.

If there is suspected fraud then that is another matter altogether.....My point is that the trigger can not ONLY be price up/down.

its only a limit for a short period of time. for the things to get verifyed. and checking for hackers, then the market resume.
of cource there are many ways to cheat, they should all be detected by the circuit breaker.

chad

newbie

Activity: 28

Merit: 0

Quote from: BTC Economist on June 20, 2011, 06:11:17 AM

After any unusual drop or rise in value, a circuit breaker must be implemented.

Reads to me that as soon as there is an "unusual" change in the price, then trading should be stopped. i.e. the suggestion of the OP is that the trigger is the higher than usual price fluctuations.

This is the definition of limit up / down.

If there is suspected fraud then that is another matter altogether.....My point is that the trigger can not ONLY be price up/down.

kokjo

legendary

Activity: 1050

Merit: 1000

You are WRONG!

Quote from: chad on June 21, 2011, 04:53:02 AM

forex markets - no limit up/down
futures markets - has limit up/down
stock markets - has limit up/down

In theory, BTC is most like currency trading. When the market gets more established, limit up/down will not be needed.

it is not a limit! when there is suspicios activity, it shutsdown. they check it if there is any, hacks/cracks/cheating performed. if not they resum the market. if cheating is perfomed, they fix the problem, and do rollback.

chad

newbie

Activity: 28

Merit: 0

forex markets - no limit up/down
futures markets - has limit up/down
stock markets - has limit up/down

In theory, BTC is most like currency trading. When the market gets more established, limit up/down will not be needed.

hamdi

hero member

Activity: 826

Merit: 500

i would not leave such a service un-manned

kokjo

legendary

Activity: 1050

Merit: 1000

You are WRONG!

Quote from: MarketAnarchist on June 20, 2011, 03:52:13 PM

Volatility is an integral part of the price discovery process. Repressing volatility does not fix the underlying cause of the volatility.

If one or some exchanges decide to introduce circuit breakers, there no doubt would be other exchanges that would market themselves as insitutions that do not use them.

Let the weak players get pushed out. The system will be stronger in the long run.

it not whats it about.
its about the teory that when mtgox gets hacked there will be a huge selloff of non exsistence bitcoins.
by deteching thes hugh selloffs, you can shutdown the market, for a short period of time, to check if the servers got hacked.
it is only protection, we are not trying to kill the free market.

ahacked hugh selloff can not happen outside of the exchanges. say i would be on bitcoins on the forum, you can not make alot of real bitcoins, but on the markets you can make alot of 'virtual' bitcoins. and then sell them.

iCEBREAKER

legendary

Activity: 2156

Merit: 1072

Crypto is the separation of Power and State.

Quote from: MarketAnarchist on June 20, 2011, 03:52:13 PM

Repressing volatility does not fix the underlying cause of the volatility.

If one or some exchanges decide to introduce circuit breakers, there no doubt would be other exchanges that would market themselves as insitutions that do not use them.

Exaggerating volatility won't help things either.

There is a market for markets, and most people will choose to use exchanges that don't externalize market friction caused by fraudulent events.

You have fun with the hackers and their scripted flash crashes over there at MtAnarchist. The rest of us will be sane and use rational markets.

Houdini

member

Activity: 84

Merit: 10

Quote from: BTC Economist on June 20, 2011, 06:11:17 AM

After any unusual drop or rise in value, a circuit breaker must be implemented. Some may say this is not free market. I disagree. It is only a pause in the action to allow the exchange to overview security and verify the legitimacy of what is going on.

Totally agree. I said the same thing in another thread.
Would prevent severe market manipulation, hacks, panic crashes...
All real stock exchanges have trade-suspending mechanisms.

MarketAnarchist

newbie

Activity: 13

Merit: 0

Volatility is an integral part of the price discovery process. Repressing volatility does not fix the underlying cause of the volatility.

If one or some exchanges decide to introduce circuit breakers, there no doubt would be other exchanges that would market themselves as insitutions that do not use them.

Let the weak players get pushed out. The system will be stronger in the long run.

kokjo

legendary

Activity: 1050

Merit: 1000

You are WRONG!

Quote from: pharno on June 20, 2011, 06:43:15 AM

I think the exchange sites should implement that by themself, not in the bitcoin protocoll

thats what we are talking about. pleas try to understand before you post

pharno

newbie

Activity: 52

Merit: 0

I think the exchange sites should implement that by themself, not in the bitcoin protocoll

Topic: Exchanges must have circuit breakers (Read 2012 times)