okay so if we assume theres still something like 22m MOB borrowed on FTX (if we assume part was already unwound (10M USD or 1M MOB))
the MOB/USD and MOB/USD books have 217K and 27K MOB worth of offers up to 2x current price
how does FTX risk system manage this on spot-margin?
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first of all: it's amazing FTX allowed that much to be borrowed given the low float in the book. im sure they know what they're doing, but normally you would set some caps to make adverse scenario easier to handle
but assuming the borrower(s) get liquidated, how to clean it up?
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not sure how well collateralised the borrows are, but first you would need to take their collateral and buy up the MOB on the book. then what?
three options:
1) MOB lenders get hosed
2) FTX trades separately out of the risk
3) Push the borrower negative, FTX chases them
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these aren't mutually exclusvie -- you could take the $200million of MOB and cover it by denting some of the MOB lenders, trading out of a chunk of the risk, and leaving the borrower with the rest of the bill
or maybe the situation is very different and FTX has some arrangement
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^Disclaimer: I'm just speculating!
FTX/Alameda are an amazing team & it would tbh surprise me if they stumbled into this situation without some plan. I don't have more info on the situation to know what is going on than just whats public and my own experience with these systems
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Replying to
FWIW all I'll say here is that there's no risk here of the lenders getting hosed
i dont mean to FUD at all
but if you were as transparent on how spot-margin risk is handled as you are on how Futures is (very detailed tbh), then it means less guess work for observers
as a liquidity-constrained system (unlike futs) it's much more fascinating to me as well.
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it should show in ftx.com/spot-margin/le under Lending History (Proceeds column)
so double check it's showing there, because the amount "available" may be impacted by other trading activity youre doing though
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can someone who is already long spot of a token margin borrow against that position in another subaccount?
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could this be what is going on? The shorter is also long for a bigger amount in another subaccount and is now slowly reducing to a net neutral position so he profits from all the people buying on the way up. (this might be a stupid idea, im clueless)
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Doesn't FTX automatically incrementally liquidate a position as it reaches margin limits?
