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Jul 28, 2019

You think if a prop firm going down on kraken caused all btcusd margin longs to get liquidated there, while a few arb firms profited, that the exchange would be not responsible?

Jesse Powell

@jespow

Jul 28, 2019

The exchange is not responsible for the price whatsoever. The exchange's responsibility is to match orders. The "price" (bid, ask, last trade, whatever) is set by the market participants, not the exchange. So, if the tech is working properly, the exchange is never responsible.

Zhu Su

@zhusu

Jul 28, 2019

Noted. So if the price of btcusd went from $10k to $1 and back to $10k on btcusd on kraken while nowhere else moved, you'd consider that the forces of the free market and that margin longs on kraken should have done more due diligence, yes?

Amrullah

@Muhd_Amrullah

Jul 28, 2019

if all orders are matched properly, why should kraken be liable?

Zhu Su

@zhusu

Jul 28, 2019

We are getting words confused here I think. I'm not arguing they should be legally liable. I'm saying if this were to occur on an exchange, it clearly means that exchange is unfit to have margin trading.

Jesse Powell

@jespow

Jul 28, 2019

So you're arguing for circuit breakers or limitations on order management to prevent a price from moving despite intent of the market participants? How do you know when your market is out of sync vs leading? How long do you wait to find out and who gets blamed when you're wrong?

Zhu Su

@zhusu

Jul 28, 2019

Max order size, max percent limit away from mid, enter auction mode (allows arbers time to prepare capital to arbitrage the flow). Many such concepts can be taken from trad mkts (esp FX, equities) I agree there are always tradeoffs and new problems would then arise potentially

Jesse Powell

@jespow

Jul 28, 2019

Yeah, ultimately the answer is more liquidity with time. In some cases people are glad you liquidated them instantly, in others mad that you didn't wait longer. Someone will always end up holding the bag. It's very hard with 24/7 continuous, loosely connected global markets.

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Everything is gameable/hackable -- it's just a matter of whether the risk-adjusted returns of the attack make it worthwhile. Problem arises where the value exceeds the security. Contract participants need to look at the total value of an attack in addition to the index quality.

8:33 AM · Jul 28, 2019Twitter Web App

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