I really think the BTC/USD contracts should be like 99% of the futures contracts in the world:
a) Denominated in some currency; USD is more natural than BTC
b) Have a constant tick size in that currency (by tick size here I mean 0.01; I realize these contracts are free-quoting and don't have ticks as such)
c) Have a trading fee that is a constant number of ticks.
The current contract specification is very confusing, and in particular makes calculating effective profit and fees very difficult. One consequence is that market move required to cover the fees is surprisingly large, and not constant.
Is there a reason this can't be done?
Topic: ICBIT Derivatives Market (USD/BTC futures trading) - LIVE - page 22. (Read 97699 times)
Doesn't this make the perfect scam opportunity then?
Scammer opens two accounts, long and short.
Long account is used to buy at about 5X leverage. Each buy is matched with a sell from the short account, also at 5X leverage.
Wait for rip roaring rally or selloff. Upon receiving first margin call notice on either the long account or the short account, close out positions on the other account that has the gains, maybe even use the account with the negative balance to provide liquidity (assuming a short can still buy to close, for example, when the account is negative). Then the profitable account withdraws the coins (variation margin is already settled when the position is closed). Two days later (or whatever the delay is) other customers with profitable positions see forced trades to cover for the negative account.
This is where leverage/margin accounts + anonymity don't mix.
I don't fully follow what you mean. The deal with margining is quite opaque on icbit. I assume a day's variation margin can cover two day's maximum move. So if an account hasn't funded an EOD margin call by the end of next day, they have enough money at hand to close them out at that 2nd days' worst price. It means someone else loses their position, but at least they're getting out at the best possible price of the day.Scammer opens two accounts, long and short.
Long account is used to buy at about 5X leverage. Each buy is matched with a sell from the short account, also at 5X leverage.
Wait for rip roaring rally or selloff. Upon receiving first margin call notice on either the long account or the short account, close out positions on the other account that has the gains, maybe even use the account with the negative balance to provide liquidity (assuming a short can still buy to close, for example, when the account is negative). Then the profitable account withdraws the coins (variation margin is already settled when the position is closed). Two days later (or whatever the delay is) other customers with profitable positions see forced trades to cover for the negative account.
This is where leverage/margin accounts + anonymity don't mix.
Am I misunderstanding the way icbit "works"?
Scammer opens two accounts, long and short.
...
This is where leverage/margin accounts + anonymity don't mix.
...
This is where leverage/margin accounts + anonymity don't mix.
Duh. I discussed this very problem with Fireball ~2 years ago, before ICBIT was implemented.
It is fundamentally impossible to implement an anonymous market for classic futures.
One either needs to introduce some kind of a counter-party risk, but it has an unfortunate effect: it is quite like a lottery in sense that market participants never know when it will bite them; and it is exploitable by scammers.
Or introduce limits on profit and loss, so contracts won't behave as futures anymore.
profitable traders positions were reduced (as if they sold them to realize the profit)
Doh! I knew that was a risk. So had I sold those BUH3's yesterday at $40+ I would have kept my profit but because I pushed my luck I see part of my position sold at a lower thirty-something level because some anonymous trader was too short.
Doesn't this make the perfect scam opportunity then?
Scammer opens two accounts, long and short.
Long account is used to buy at about 5X leverage. Each buy is matched with a sell from the short account, also at 5X leverage.
Wait for rip roaring rally or selloff. Upon receiving first margin call notice on either the long account or the short account, close out positions on the other account that has the gains, maybe even use the account with the negative balance to provide liquidity (assuming a short can still buy to close, for example, when the account is negative). Then the profitable account withdraws the coins (variation margin is already settled when the position is closed). Two days later (or whatever the delay is) other customers with profitable positions see forced trades to cover for the negative account.
This is where leverage/margin accounts + anonymity don't mix.
Instead the lesson from "insufficient liquidity" you seem to have drawn is "raise fees by making it twice as expensive as it already was" for people who simply want to take a long position.
I appreciate your comments and critique, but I don't follow your logic in this specific message.The fees are 5 times lower for BUU3 than for BUH3 already now, and additional discounts will be available pretty soon for all contracts.
I was talking about BUJ3 - still 0.003 BTC per contract. At current prices that's 1 full point it has to move in your favour before you make any money on a new position. But if BTC goes to 50, that becomes 1.50 full points it needs to move in your favour before you make any money on a new position. At 60 USD per BTC it's about 2.2 points before profit!
BUU3 is much more reasonable *at the moment*, though still more expensive than BUH3 when it came out. But that would be quickly wiped out by BTC price rises as ticks-to-profit goes up with the square of the price. BUH3 price has almost quadrupled, so let's say that equates to a 14 times increase in ticks-to-profit. Buy you only reduced trading fees by a factor of 5.
Instead the lesson from "insufficient liquidity" you seem to have drawn is "raise fees by making it twice as expensive as it already was" for people who simply want to take a long position.
I appreciate your comments and critique, but I don't follow your logic in this specific message.The fees are 5 times lower for BUU3 than for BUH3 already now, and additional discounts will be available pretty soon for all contracts.
It still would be nice for there to be shown the history of daily clearing prices. (And also the ability to access the charts and order book without first authenticating, incidentally.)
Indeed I heard many similar requests, however I want to make some tradeoff by making the frontpage way more informative and "live" than the currently existing one, however imposing some limitations (slower update rate, for example) not to overload the server with many unauthenticated and thus uncontrolled connections.This is already in progress, so should be deployed relatively soon.
I would also appreciate unauthorized access to the order book. You see, I'm considering creating a website that actively tracks backwardation in bitcoin. So in order to track that I need to know the asks for the futures contracts, and the bid on BTC on Mt. Gox. Mt. Gox already has public order books, so your site is the only missing piece of the puzzle.
There were higher priority stuff, but now it may be perfect time to do this, because I will be doing a publicly available futures dashboard anyway.
The magnitude of USD/BTC rate changes allows traders to make large enough profits (without revealing any confidential data, profits from 100 to 300 BTC are rather common).
Eventually, either USD/BTC rate or our fees would drop
You said you introduced the rule to "stimulate liquidity". It seems you are concerned liquidity is not good enough.Eventually, either USD/BTC rate or our fees would drop
If I were you, I'd be lowering your fee, so tightening the bid-offer and encouraging trading by making it cheaper and easier to get in and out.
Instead the lesson from "insufficient liquidity" you seem to have drawn is "raise fees by making it twice as expensive as it already was" for people who simply want to take a long position.
I really don't think this will work out well for you. The nature of the contract spec, with its inverse quote and USD denomination, but the egregious taking of fees in BTC, has probably obscured the true cost to participants. But when they look at their P&L I don't think it will escape their attention for long. As I said, I won't be trading these until the inverse-square relationship of price to bid-offer spread is fixed, or fees are significantly reduced.
As many of you are already aware, we launched three new contracts:
[/list]
There are a couple more differences from the old contract which I would like to point out:
a. The fee in contract specification is not fixed, so it may be changed in future, if it becomes necessary.
Yikes! So even J3 is going to cost a full point to trade in-and-out, whether you out or not!- BTC/USD-4.13
- BTC/USD-6.13
- BTC/USD-9.13
[/list]
There are a couple more differences from the old contract which I would like to point out:
a. The fee in contract specification is not fixed, so it may be changed in future, if it becomes necessary.
I think I'll leave it alone, thanks. I wouldn't call that "stimulating liquidity", more like "killing it".
The magnitude of USD/BTC rate changes allows traders to make large enough profits (without revealing any confidential data, profits from 100 to 300 BTC are rather common).
Eventually, either USD/BTC rate or our fees would drop
There are a couple more differences from the old contract which I would like to point out:
a. The fee in contract specification is not fixed, so it may be changed in future, if it becomes necessary.
b. There is a settlement fee for these 3 new contracts, which is the same as a trading fee. This fee exists on most futures exchanges and it's needed to stimulate liquidity on the market, which is good for the market.
Yikes! So even J3 is going to cost a full point to trade in-and-out, whether you out or not!a. The fee in contract specification is not fixed, so it may be changed in future, if it becomes necessary.
b. There is a settlement fee for these 3 new contracts, which is the same as a trading fee. This fee exists on most futures exchanges and it's needed to stimulate liquidity on the market, which is good for the market.
I think I'll leave it alone, thanks. I wouldn't call that "stimulating liquidity", more like "killing it".
Are fees constant once a contract is introduced or do they rise approaching maturity? As they seem to reduce for later contracts. Why not denominate fees in USD to avert the ridiculous charges now on H3?
The H3 one specification did not state that the fee could be changed, so we decided to add new contracts with amended specification and lower initial fees instead of changing existing contract specification (which would be rather bad).
Indeed, this situation will be closely monitored, and as a futures trader myself, I understand the concerns you expressed.
Speaking of which, we do have very low-fee contracts. For example GOLD and OIL futures, and of course the S&P500 futures: it's just great from that point of view. Even 1 tick trade could still be profitable, as fees won't eat the profit.
As many of you are already aware, we launched three new contracts:
[/list]
There are a couple more differences from the old contract which I would like to point out:
a. The fee in contract specification is not fixed, so it may be changed in future, if it becomes necessary.
b. There is a settlement fee for these 3 new contracts, which is the same as a trading fee. This fee exists on most futures exchanges and it's needed to stimulate liquidity on the market, which is good for the market.
I plan to implement some kind of a dashboard for better market overview, since there are so many contracts trading now
- BTC/USD-4.13
- BTC/USD-6.13
- BTC/USD-9.13
[/list]
There are a couple more differences from the old contract which I would like to point out:
a. The fee in contract specification is not fixed, so it may be changed in future, if it becomes necessary.
b. There is a settlement fee for these 3 new contracts, which is the same as a trading fee. This fee exists on most futures exchanges and it's needed to stimulate liquidity on the market, which is good for the market.
I plan to implement some kind of a dashboard for better market overview, since there are so many contracts trading now
where on your site are these things explained? There is very little detail or explanation of margining and close out procedures that I could find, and such information is fundamental for anyone deciding whether to trade.
It should take you just a few seconds to locate this information on the website: https://icbit.se/margincallThanks, for some reason I couldn't find it besides looking twice. Any comments on fees?
Are fees constant once a contract is introduced or do they rise approaching maturity? As they seem to reduce for later contracts. Why not denominate fees in USD to avert the ridiculous charges now on H3?
Even J3 fees - a new contract - are a full point for in-and-out.
where on your site are these things explained? There is very little detail or explanation of margining and close out procedures that I could find, and such information is fundamental for anyone deciding whether to trade.
It should take you just a few seconds to locate this information on the website: https://icbit.se/margincallWe had to close a few profitable positions due to non-paying customers
I'm confused. If it was a profitable position it would add variation margin and thus no payment would be required. About the only thing that would explain a profitable position seeing forced margin selling would be if the margin requirements changed, which if true would be news to me.
One person shorted too much, and did not add money in the account to upkeep the position, so account reached negative state. And there are no asks in the order book to cover the short position. So it falls into the "worst case": the system chooses counter parties (longs in the same futures contract in our case) with biggest unrealized profit by itself, and makes a forced trade (buy to cover) between these parties.
As a result, the person who was in debt ends up with 0 BTC in account (there were a few emails sent, and waiting time was a few days), and profitable traders positions were reduced (as if they sold them to realize the profit).
where on your site are these things explained? There is very little detail or explanation of margining and close out procedures that I could find, and such information is fundamental for anyone deciding whether to trade.
Where is a history of traded volumes and prices? Those weak graphs don't count and lack detail and precision.
I don't even see 24 hour volume....
We had to close a few profitable positions due to non-paying customers
I'm confused. If it was a profitable position it would add variation margin and thus no payment would be required. About the only thing that would explain a profitable position seeing forced margin selling would be if the margin requirements changed, which if true would be news to me.
Yeah explanation makes no sense.
And trading fees at this exchange are outrageous on H3 - over 1.7 points are charged just for a buy and sell, ie. 170 ticks! I wonder how many buyers buying at 41 realise they make no money selling below 42.7?
No wonder spreads are so wide. Fees should be in USD and converted to BTC at the price traded...
In real futures markets in-and-out typically costs one tick or less. Here fees are two orders of magnitude greater.
We had to close a few profitable positions due to non-paying customers
I'm confused. If it was a profitable position it would add variation margin and thus no payment would be required. About the only thing that would explain a profitable position seeing forced margin selling would be if the margin requirements changed, which if true would be news to me.
One person shorted too much, and did not add money in the account to upkeep the position, so account reached negative state. And there are no asks in the order book to cover the short position. So it falls into the "worst case": the system chooses counter parties (longs in the same futures contract in our case) with biggest unrealized profit by itself, and makes a forced trade (buy to cover) between these parties.
As a result, the person who was in debt ends up with 0 BTC in account (there were a few emails sent, and waiting time was a few days), and profitable traders positions were reduced (as if they sold them to realize the profit).
We had to close a few profitable positions due to non-paying customers
I'm confused. If it was a profitable position it would add variation margin and thus no payment would be required. About the only thing that would explain a profitable position seeing forced margin selling would be if the margin requirements changed, which if true would be news to me.
Maintenance break in trading services now. I will post here/tweet when things are done.
We had to close a few profitable positions due to non-paying customers (you can see that Open Interest reduced) at below-market prices.
However, as a bonus, those whose profitable positions were reduced, got part of their profit secured without any trading fees.
Trading is back to normal. Thanks for using ICBIT!
Maintenance break in trading services now. I will post here/tweet when things are done.
Looks like someone with a short got liquidated on a BUH3 short position?
Showing bids getting filled all the way down to $34.2. Dammmnn, so I guess it would have paid for me to have left a few lowball bids out there just in case this type of event happens, it appears.
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