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SBF
@SBF_FTX
Replying to
@SBF_FTX
7) glad we’re introducing WMD language to this discussion, really appropriate and well-scoped to DCO margin applications, certainly nothing else recently that would fit it better
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SBF
@SBF_FTX
8) price bands prevent flash crashes. We have price bands. Not sure why some are assuming we wouldn’t.
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SBF
@SBF_FTX
10) with delayed margin calls you have to choose between liquidating too early and often, needlessly closing down customer positions, or waiting too long, like LME nickel With real time margin you can be precise, preserving customer positions longer while avoiding systemic risk.
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SBF
@SBF_FTX
11) real time margin is risk reducing and protects customers!
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SBF
@SBF_FTX
12) yes the large amount of margin is important in traditional models Which is why we also require margin! We have tens of billions of collateral just for digital assets on FTX.
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SBF
@SBF_FTX
13) to clarify, I think the risk model generally works well for digitally settled assets; it would require more work to be as appropriate for goods whose settlement is primarily in physical warehouses
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SBF
@SBF_FTX
14) moderator bringing up improvements in payments settlements instead of improvements in margin settlements It’s a really good point! …why not both?
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SBF
@SBF_FTX
16) agree also with Parker that intermediation in risk models is different from intermediation in order processing or customer facing
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SBF
@SBF_FTX
Replying to
@SBF_FTX
18) agree with ICE that the system should allow people to extend credit to those in danger of margin calls But that shouldn’t be the DCO on behalf of its other customers and members—that is one party posting another’s assets without asking!
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SBF
@SBF_FTX
19) in our model, others are still able to extend emergency credit to a firm—using their own capital, not other customer’s!
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SBF
@SBF_FTX
20) frankly the thought of the risk manager for a DCO on the phone with a large customer, choosing to not margin call them and *risking the DCO’s other assets on that call* is scary! It should be forms/FCMs/etc risking their own assets on that call.
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SBF
@SBF_FTX
21) and crucially, other FCMs/members/customers should not be exposed to that decision
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SBF
@SBF_FTX
22) one party said, as — I think — a criticism, “if customers can choose whether or not to use an FCM, they won’t” First—that seems to imply FCMs don’t provide any value. I think many do, and so customers would want to keep using them! But also, if customers choose something…
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SBF
@SBF_FTX
24) note, again, that FTX doesn’t rely on credit, and so doesn’t require additional capital backing credit—though it still does absolutely require both initial margin, and a guarantee fund etc.
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SBF
@SBF_FTX
25) great point by Virtu—FCMs can still provide credit/capital to customers to prevent margin calls! But the capital ends up at the DCO one way or another, so other members aren’t impacted
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SBF
@SBF_FTX
26) recent comment seems to forget—as is clearly stated in the “stylized facts”, our application, etc.—that we have a guarantee fund in addition to margin
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SBF
@SBF_FTX
27) also once again ignores all the existing data about risk model performance And in the end, CFTC/DCR are experts in analyzing this and wouldn’t ultimately approve a model they found inadequate
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SBF
@SBF_FTX
28) really agree with the points Cisewski is making! We need more competition in futures markets. And in the end, the actual performance of the models is what matters.
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SBF
@SBF_FTX
29) there are already DCOs live without FCMs—this doesn’t require new rule making And we would like to allow for FCMs as well
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SBF
@SBF_FTX
30) on self-certification and new asset classes—DCR can approve margin models for particular products/asset classes, which limits spread
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SBF
@SBF_FTX
32) glad to hear talk from a competitor about needing engagement before self-certs, guessing they would support having a round table discussion before each of their self certs?
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SBF
@SBF_FTX
33) a lot going on here—simultaneously debating crypto, algorithms, computers, retail, 24/7, etc. most of these already exist on other DCOs, and really unclear what her point is. And weird that she’s skeptical that markets increase liquidity!
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SBF
@SBF_FTX
34) remember price bands—people are protected from 1 minute market moves! Also—users know _way_ more than any of these people about these markets, ironic to hear the opposite condescendingly said.
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SBF
@SBF_FTX
36) good point by Dave Olson—this is the model that many are already used to!
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SBF
@SBF_FTX
37) ohhhh boy is this going to be a few minutes per person of closing statements? If so, that’s a few *hours* worth.
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SBF
@SBF_FTX
40) pleasantly surprised by the constructive closing statement from RJO!
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SBF
@SBF_FTX
42) people asking whether this model makes economic sense or is the best model. Not really supposed to be the purview, and not usually required for businesses to prove their model is best to be allowed to operate. That’s what economic competition and consumer choice are for!
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SBF
@SBF_FTX
43) reeeeeaally good points by Dave/Jump here; innovation is really hard in the current system!
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SBF
@SBF_FTX
44) helpful point by DRW—models are not about better/worse, they’re about consumer choice and economic competition
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SBF
@SBF_FTX
45) note about capital usage—real time margin reduces the effective risk period, which reduces capital demands
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SBF
@SBF_FTX
47) re: retail: what if the DCO/DCM has all the standard protections, and CFTC oversight?
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