Dear valued customers,
At 5:00-6:30 on Mar 30, 2018 (Hong Kong Time), the price of BTC quarterly futures contract was manipulated by a group of people, making it fall significantly below the BTC index.
This triggered our system’s alarm and our team immediately investigated the incident:
Several users exploited the opportunity to manipulate our market at around 5am (Hong Kong Time) by closing a huge amount of positions regardless of the cost. Due to market inactivity and comparatively low liquidity during the period, the price of BTC futures slid down and triggered forced liquidation of more positions. Moreover, the slide caused customers’ stop loss orders to execute automatically. Not to mention that driven by fear, more customers sold-off their positions, provoking further dive of the price. The chain reaction cycle kept repeating, hence the extreme deviation between the contract’s price and the index price.
For the best interests of our customers, we evaluated the situation and informed everyone by announcements immediately. Through a lot of discussions, we formulated the best solution possible which we will explain below:
(Hong Kong Time)
Announcement of our action plan for the incident. We decided to rollback all the futures contracts to the time before the incident happened - 04:07 Mar 30, 2018, and all contracts would be delivered right after the rollback.
Rollback of database successfully. Announcement of the delivery prices of all futures contracts.
All rollbacks completed. New "Price limit rules" are launched to prevent similar incidents from occurring.
Futures Trading, funds transfer and withdrawal resumed.
The rationale behind the rollback and the immediate delivery:
Unlike traditional stock markets, digital asset investment - futures trading in particular, is extremely volatile. OKEx has a comprehensive management system which includes margin rules, price limit rules and also rollback protocol to control systematic risks. Rollback protocol is formulated to prevent malicious price manipulation which harms the public by exploiting the system's flaw. In this incident, the futures contract price was manipulated to deviate from the index price for more than 25%, leading to forced liquidations of many user accounts.
For the interests of our users and according to the term 6.2 of OKEx Futures Trading User Agreement, we decided to rollback transactions to eliminate the adverse effects induced in the futures market. This decision should help maintain the market stabilities in Fiat and Token Trading, and secure the funds of all our users.
Immediate delivery after the rollback was executed to prevent the systematic risk of forced liquidations of many accounts, since there would be huge price differences after trading resumes, and users might not be able to close the positions in time to avoid forced liquidation. So we adopted this approach to help the market return normal as soon as possible.
As a digital asset exchange which serves millions of users, OKEx has the obligation to provide a robust and orderly trading environment. A new "Price limit rules" is forthwith employed in consideration of this incident.
We are committed to continue improving our services and technology. We have collaborated with top international teams to build a better risk management system, to avoid similar issues from happening again.
Also, other than the waive of 7-day transaction fees, we will launch more customer benefits in the near future, as a gesture of appreciation to your continued support.
Mar 31, 2018