VALLETTA, Malta, June 17, 2019 /PRNewswire/ -- Since the launch of Perpetual Swap last year, OKEx has introduced an enhanced risk management system in response to the derivatives market risks triggered by extreme volatility in the past few months and achieved a significant result -- zero clawback since launching. The enhanced risk management system is then applied to OKEx's futures trading.
The upgraded system comprises three major elements --
- Mark Price -- introduced back in January
- Tiered Maintenance Margin Ratio (TMMR) System -- to avoid liquidation of large positions and its after-effect on market liquidity
- Forced Partial Liquidation Mode -- to eliminate the market impact caused by a large number of liquidated orders
In a nutshell, the new risk management system has successfully struck a balance between the risks and users' interests. When at risks, positions will be liquidated closer to the bankruptcy price, allowing users more opportunity to remain solvent and recover from the risks, rather than being liquidated in the first place. Also, this allows users to enjoy a high effective leverage.
One good example to demonstrate the remarkable performance of the upgraded system is the recent Bitcoin (BTC) flash crash incident which happened in May. The incident was caused by a 5,000 BTC dump at an oddly low price of US$6,200 on other exchange. The massive sell order caused the BTC price plunge from US$7,800 to US$6,100 in only 10 minutes and created a short-time arbitrage opportunity. However, thanks to our diversely-constituted mark price of BTC, which is formed by the market prices from the other five major exchanges, GEMINI, Coinbase, Bitstamp, Kraken, and OKCoin, a price crash in one particular exchange would not cause devastating effects on OKEx markets.
During the incident, the enhanced risk management system has demonstrated excellent performance and stabilized the quarterly contract price at around US$7,000, despite the volatility of certain spot markets. Impressively, given such a volatile condition, no clawback took place at OKEx.
One simple philosophy on enhancing OKEx's futures market -- to strike a better balance between avoiding early liquidation and maximize traders' benefits. Developing a robust decentralized crypto marketplace where everyone can trade freely in a fair manner is always our mission.
This month also marks the 6th year of BTC Futures since its first launch in the digital asset trading market in 2013. BTC Futures, one of the hero products of OKEx, has been one of the most innovative exchange offerings in the industry, combining blockchain technology and derivatives trading from the traditional financial market. Stay tuned with us for more activity updates.