As a pioneer of crypto-derivatives, OKEx Futures are now serving millions of customers globally with one of the most liquid instruments designed to hedge exposure across various digital assets. OKEx’s core values and strengths are in actively engaging with the community and listening to customers. Over several months OKEx’s product team received a good amount of community feedback, questions and advice on trading mechanisms.
After careful deliberation we would like to offer an insight into our upcoming enhancements to the community. After all, we believe transparency is key in building a fair and orderly market. We would also like to invite the community to continue to send us suggestions and accompany us on our journey to building a fully-fledged derivatives market for digital assets.
To reduce the risk of manipulation in the futures market and minimize the possible societal loss aswell as any other incidents, we have implemented a series of measures to ensure fairness and objectivity in the market to protect users' interest.
A. Technological Scaling
- Optimization and Scaling of Matching Engine;
- Increase API Limits
- Support more underlying
- We spent a significant amount of time optimizing our core matching engine for the sake of supporting a higher limit on different protocols. It’s at the final stage and we expect it should be complete in mid-August.
- We optimized our data storage mechanism to segregate our database per contracts underlying. Development shall be done in August and we expect the upgrade would increase our stability and scalability significantly on our contracts offering.
- Our API (V3) will be rebuilt with more features. Beta testing is now on-going and we expect to launch in mid-August.
B. Margin Rules and Risk Management
Objective:To safeguard users from unnecessary liquidation triggered by large and deliberate market manipulation
Solution:Mark price would be employed to calculate the unrealized PnL, margin ratio, and estimated bankruptcy price. Hence the forced liquidation would only be executed with the reference on mark price.
Formulae of Mark Price: Spot Index Price + EMA (Futures Market Price – Spot Index Price)
Methodology of mark price formulae is to take reference of spot (index) price plus a reasonable basis point as a fair price of the instrument. EMA (Exponential Moving Average) places great weight on recent basis. We believe it should substantially increase the cost of any deliberate market manipulation.
Timeline:We expect the mark price should be launched in coming August.
2. Tiered Margin System & Optimized the Process of Forced Liquidation
Objectives:To prevent cascade liquidation triggered by large liquidation which depleted the insurance fund and triggered the clawback mechanism.
- We would adjust the required maintenance margin on each user according to their holding positions – larger positions, higher margin and the effective leverage should be lower. We believe such tiered-margin system is the cornerstone of minimizing the occurrence of clawback.
- We would also optimize our liquidation algo for bankruptcy orders by way of deleveraging the users’ positions to a lower margin tier. We believe the new process would vastly minimize the size of bankruptcy positions and its potential market impact.
Timeline:Expected in September starting from one underlying
3. Optimize the Usage of Insurance Fund
Objectives:Minimize the occurrence of clawback due to a depletion of insurance fund.
Solution:Our risk management system will monitor all unfilled bankruptcy orders. Once the unrealized loss reaches a certain level, the execution engine would take over those mentioned orders and route to the market ASAP with a relative aggressive execution algo. Insurance fund would be immediately utilized to cover the shortfall. We aim to liquidate the risky positions at best price thus minimizing the occurrence of clawback.
Timeline:Expected in September
C. New Product: Perpetual Contracts
Perpetual Contracts are designed to serve clients who request a contract type without the need of settlement and roll-over.
We expect our perpetual contract would share similar aforementioned margin rules and risk management methodology. One of the key characteristics distinguished between futures and perpetual contract is the funding cost.
We expect the contracts shall be rolled out to the market around September
OKEx, has re-domiciled to Malta with offices in Hong Kong and the U.S. Our Malta operation is a legitimate trading platform registered compliantly according to local laws and regulations. We would like to reiterate that OKEx is a mere platform matching buyers and sellers who takes no responsibility for the price volatility and we would never be the counterpart of our client. The only source of revenue of our futures platform is transaction fees and we would not trade against our client. This is our bottom line.
We would like to reiterate that should there be any losses caused due to our negligence, we always welcome negotiation of compensation and are fair, understanding and supportive of our affected users. However, to all losses made in standard trading practices and rules, we would not offer any monetary compensation to the affected users, no matter what extreme action they may take.
We would like to remind all users that digital assets are high-risk investments, and the derivatives of which are of even higher risks. Please make sure you fully understand the risks involved and relevant risk management measures before trading. Due to its high-risk nature, OKEx is one of the first platforms in the world to carry out an investors’ risk assessment for all users before they can begin futures trading.
We aware of our design is far from perfect. Our community has been fantastic, receptive and we are incredibly appreciated of the feedback we have received.
As always, we welcome any thoughts you may have. Should you have comments or advices, please kindly sent your suggestion to firstname.lastname@example.org
Thanks for your support to OKEx.
ACX Malta Technology Company Limited