The current $BAL listing on can be manipulated easily. Someone can buy( or sell) BAL June futures, expiring tomorrow, in large quantities, and swing the price in their favor before settlement. Here is why I think this can happen, easily. /1
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The futures settle based on an index price. Generally, it is a combination of multiple exchanges' price. But, not many exchanges have listed BAL, so the index is based only on one pair BAL-USD, which is traded on FTX Exchange itself. The spreads on BAL-USD are around 1-2% /2
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..and June Futures is currently 3-4%. Also, the orders books are pretty thin right now. Remember, that the June Futures settle in around 14 hours from now. So, how can you manipulate it? In the next few hours, you accumulate( or sell) as much BAL June futures' contract /3
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Currently, there are around 2000+ contracts on the ask side (notional value:~ $40k+, say avg. price 20). Now, a few mins before the expiry you can buy all the BAL on the ask side or (even sell all of the bid sides if you are short) of BAL-USD just to tip the scale on your side /4
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Based on the present situation, e.g. I can buy up to 1500 BAL from BAL-USD and the price would be 30 (50% from right now) if it expired now Why does it matter? When the price settles, all contracts expire at the settlement price. So, effectively your June futures gained 50% /5
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The risk to this is, at the time of expiry when you buy BAL, you are stuck with it. You need to sell it (markets are thin) or keep it or hedge it with sept futures. /6
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But, here the idea is that with a few thousand $$ you can move the market because of the thin illiquid market and a single source for index price. This isn't new, people do it with multiple exchange sources also. It has happened on for $BTC. /7
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However, the idea is to make it difficult for someone to do it. is really making it easy & I hope it waits for introducing futures contract so early for such illiquid markets.e.g. It can be difficult with Sept Futures because the expiry date is far.
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A few things:
1) this is definitely less liquid than other things we've listed!
2) expiration is a 1-hour twap so just sending an order doesn't work--you'd have to do it continuously for an hour, which would give people plenty of time to trade against it and return BAL's price
Thanks,
Oh thanks. Didn't know this with regards to quaterlies.
Anyways, even if that is true people can still create the buy pressure on the market to profit
My point was more on the fact that there shouldn't be futures expiring so early for a thinly traded markets
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Yeah tbh we probably shouldn't have bothered with the 0626's, they're not sufficiently different from perpetuals
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