Conversation

SBF
@SBF_FTX
Replying to
@SBF_FTX
9) You can see why some shady exchanges could use this to justify faking volume. "We just wanted our graphs to be informative!", they say. "We're looking out for our customers!"
1
11
SBF
@SBF_FTX
10) To be clear, I do _not_ endorse faking volume to make graphs look pretty--it's vital for the space that we present real accurate data. That's, like, the whole point of blockchains! But this does present a real headache for many exchanges. Using our mark price fixes this.
1
14
SBF
@SBF_FTX
11) So, ok, last isn't great. But why not mid? Well, say that some exchange's market is $10 @ $9500. "Mid" is $4755, but that's probably not what the coin is worth. It could be worth $9400! The problem is that if markets are too wide, mid might be crazy.
1
5
SBF
@SBF_FTX
12) So in that case, you need something better than mid--you need to narrow it down within the spread. And the last traded price is a pretty reasonable way to do it.
1
7
SBF
@SBF_FTX
12) Sure, your pricing might not be quite right--it could be worth $9300 now instead of $9400--but when a market is $10 @ $9500 your goal isn't "show the exact fair value". Your goal is "show something that's not totally insane". So once again our mark price is reasonable.
1
6
SBF
@SBF_FTX
13) Now I don't want to claim that median(bid,ask,last) is the _perfect_ system. There are lots of others! Should you incorporate bid size? How about time since trade? Maybe!
1
7
SBF
@SBF_FTX
14) But it shouldn't be an exchange's goal to do really complicated calculations to estimate fair values for customers--that's their job. The goal is to report accurate, timely, reasonable data that's easy to parse. Mark price is simple to understand and it's reasonable.
2
19
James Bryan
@JamesBryanBob
Replying to
@SBF_FTX
and
@SBF_Alameda
I'm probably gonna say something dumb here, so please correct me and reassure me: since FTX's mark price is not an average of several spot exchanges prices, and since liquidations on FTX are triggered by mark price, what prevents unnecessary liqs coming from flash wicks on FTX?
1
SBF
@SBF_FTX
Replying to
@JamesBryanBob
our _index_ price is the average of multiple exchanges, but our mark price is just a function of the orderbook. Most futures exchanges do this (liq based on market not on index)--price bands prevent huge wicks:
help.ftx.com
Order Limits and Price Bands
Order Limits Users can’t send orders that would move the price more than 2% (for futures markets) or 25% (for spot markets) through opposite side of the book. Orders too far through the book get ...
1
1
James Bryan
@JamesBryanBob
Replying to
@SBF_FTX
and
@SBF_Alameda
That "price bands" part I had no clue about 👍 To sum it up: liq triggered by mark, mark doesn't seem to care a about avg spot price at first glance, but since mark is derived from and allowed by order placement rules which price bands limits are part of, somehow it does.
1
1