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SBF
@SBF_FTX
Replying to
@SBF_FTX
13) FTX's MNGO index price moved--there should be *some* update--but much less than others because of those EWMA price bands. In particular, while FTX's index topped out at a ~100% increase, on some exchanges the move (temporarily!) hit a +900% increase (!!!).
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SBF
@SBF_FTX
14) Second, FTX uses 'IMF Factors'. The larger your position, the greater % margin we charge. For MNGO, the margin we charge is 0.00025 * sqrt(MNGO tokens). If you wanted to have a 500m MNGO position, FTX would have required, uh, 500%. (Bounded at 'fully funded'.)
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SBF
@SBF_FTX
16) And some positions -- like the one in question -- are large and illiquid enough that the risk engine forces you to fully collateralize a position.
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SBF
@SBF_FTX
17) So even before hitting position limits, the risk engine ensures that the collateral backing a position is sufficient. And what if you try to use something other than dollars as collateral? Well, we haircut it. In some cases, a lot.
help.ftx.com
Spot Margin Trading Explainer
  Overview With spot margin trading, users can trade with leverage and go short on spot markets by borrowing from other users (lenders) on FTX, who are looking to earn yield on their assets. Rates ...
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SBF
@SBF_FTX
18) (It's worth noting that this is all referring to FTX International. In addition to all of the above protections, our amendment for FTX US Derivative's margin order would only be for BTC and ETH futures using USD margin. No MNGO, and certainly no MNGO collateral.)
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SBF
@SBF_FTX
19) There are a bunch of other risk engine protections and sanity checks, too, which would have caught something like this. So -- back to the oracle. It reports: "MNGO: $0.40" Is it wrong?
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SBF
@SBF_FTX
20) Well, it depends on what it's promising. But probably it's just promising to tell you, literally, what MNGO is currently trading at. And, for a brief period, on some exchanges, MNGO was in fact trading at $0.40. The real problem here was using the raw oracle price.
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SBF
@SBF_FTX
21) The Oracle tells you everything and nothing--the history and current state of markets. It's the risk engine's job to consume that information, and decide what positions are safe. Sometimes it can't just regurgitate The Oracle. Sometimes it has to make up its own damn mind.
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SBF
@SBF_FTX
22) Which doesn't mean that the risk engine needs to be manual. You can create a set of rules for it so that it's conservative, and handles apparent large moves gracefully. That, in the end, is probably the most important thing we do at FTX.
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cad6456
@CAD6119
Replying to
@SBF_FTX
Apparently pyth wasn’t even used for the MNGO price in this case FYI. Mango should definitely have been taking a cue from FTX in how to minimize this attack vector
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