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Offline jsidhu

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swiss bank move was what we waited for... its here
« on: January 16, 2015, 05:48:40 PM »

Alpari filed for bankruptcy. The move was caused by central banker and im sure his family and friends made out like bandits... A surprise move from central authority should never happen unless ur dead in the water anyway.


so banks force tier 2 liuquidity providers to fully cover each trade thus if client margins out broker covers... alpari was worth half a billion.

Fxcm which i hate is publicly traded lost 90% value as clients lost over $250 million...

All in all retail forex market lost about a billion. Thats prob a big chunk of all of it so big win for the blockchain.. especially bts.. would be harder to lose money on our platform
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Offline speedy

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Re: swiss bank move was what we waited for... its here
« Reply #1 on: January 16, 2015, 05:58:01 PM »
I dont see how fx traders would ever be interested in BitShares. The leverage is non-existent (its opposite of leveraged).

Offline jsidhu

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Re: swiss bank move was what we waited for... its here
« Reply #2 on: January 16, 2015, 06:16:45 PM »
I dont see how fx traders would ever be interested in BitShares. The leverage is non-existent (its opposite of leveraged).

Yea.. but I thought one of the goals was to be appealing to the forex industry.. maybe not retailers but large funds which need to move money (providing liquidity) without the need for leverage.
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Offline Ander

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Re: swiss bank move was what we waited for... its here
« Reply #3 on: January 16, 2015, 06:27:25 PM »
I dont see how fx traders would ever be interested in BitShares. The leverage is non-existent (its opposite of leveraged).

Maybe because it will allow them to trade without losing 100% of their money when everything blows up like this. :)

It would be nice if we could offer these traders more leverage, but as soon as you do that you open up a ton of risk in the whole system.
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Online vlight

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Re: swiss bank move was what we waited for... its here
« Reply #4 on: January 16, 2015, 06:44:04 PM »
I dont see how fx traders would ever be interested in BitShares. The leverage is non-existent (its opposite of leveraged).

Maybe because it will allow them to trade without losing 100% of their money when everything blows up like this. :)

It would be nice if we could offer these traders more leverage, but as soon as you do that you open up a ton of risk in the whole system.

Losing 100% is one thing, but a lot of traders also ended up with negative balances.

Offline Ander

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Re: swiss bank move was what we waited for... its here
« Reply #5 on: January 16, 2015, 06:48:49 PM »
Losing 100% is one thing, but a lot of traders also ended up with negative balances.

Exactly.  This means that the platform might now be on the hook for those losses, which if they are big enough mean the trading platform itself goes down  because they have no money left to pay them out, and everyone loses their money, even those that were on the right side of the trade.
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Offline kisa

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Re: swiss bank move was what we waited for... its here
« Reply #6 on: January 16, 2015, 06:56:58 PM »
Professional FX traders should not be targeted. IMHO decentralised bitFX trading is no substitute for efficient and well established FX trading via CFDs with any reasonably strong bank/broker/centralised exchange. Only when bitAssets are widely used in economic transactions, then the genuine demand for bitFX platform will be created.

Offline santaclause102

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Re: swiss bank move was what we waited for... its here
« Reply #7 on: January 16, 2015, 07:14:19 PM »
Am I reading that right? Alpari allowed their customers to make leveraged bets without requiring that their customers put up 100% collateral. On the contrary customers are allowed to get leverage while only having a fraction of what they could loose as collateral. I read before that this is industry standard. As a consequence of such practice the devaluation of the Euro caused insolvency of Alpari's customers and therefore Alpari itself probably because of few people panicked and forced a lot of forex bets to cover before Alpari would be insolvent. Is that about right?

So Alpari therefore should be insolvent but not bankrupt since they can still legally have claims towards customers who didn't fill for personal bankruptcy.
 

Offline lil_jay890

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Re: swiss bank move was what we waited for... its here
« Reply #8 on: January 16, 2015, 07:24:42 PM »
Depends on their terms of service... The client is usually technically on the hook for the loss, but good luck collecting even 25% of what was lost.  This brankrupted more than brokers.

The move was massive for any market and especially massive for forex... stop orders were jumped and filled at much lower prices that basically destroyed most traders who had open short CHF positions.

Many brokers did weather this storm fine though... Alpari and FXCM are rumoured to have been trading there own book, meaning that they didn't match clients with other clients.  They took the opposite sides of their clients long CHF trades predicting that the swiss national bank would keep the peg.  They bet wrong and now they are up sh*t creek without a paddle.

Offline santaclause102

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Re: swiss bank move was what we waited for... its here
« Reply #9 on: January 16, 2015, 07:30:21 PM »
Many brokers did weather this storm fine though... Alpari and FXCM are rumoured to have been trading there own book, meaning that they didn't match clients with other clients.  They took the opposite sides of their clients long CHF trades predicting that the swiss national bank would keep the peg.  They bet wrong and now they are up sh*t creek without a paddle.

Do you have any proof or source for this? We could make a good PR story with this... "let the machines / a decentralized open source based network do the order matching"...

Offline Rune

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Re: swiss bank move was what we waited for... its here
« Reply #10 on: January 16, 2015, 08:09:09 PM »
Over time you can easily do highly leveraged trading of bitasset against bitasset. It will have exactly the same risk normal leveraged forex trading, minus the counterparty risk and plus the systemic risk of BTS crashing. 20 years into the future and with enough traction bitshares could eat the entire forex market.

Offline lil_jay890

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Re: swiss bank move was what we waited for... its here
« Reply #11 on: January 16, 2015, 08:19:32 PM »
Many brokers did weather this storm fine though... Alpari and FXCM are rumoured to have been trading there own book, meaning that they didn't match clients with other clients.  They took the opposite sides of their clients long CHF trades predicting that the swiss national bank would keep the peg.  They bet wrong and now they are up sh*t creek without a paddle.

Do you have any proof or source for this? We could make a good PR story with this... "let the machines / a decentralized open source based network do the order matching"...

No proof yet but I bet we get some over the next few weeks.  It's not illegal, but definitely doesn't give centralized brokers a good name.  Especially since FXCM and Alpare were considered top teir brokers.

Offline Ander

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Re: swiss bank move was what we waited for... its here
« Reply #12 on: January 16, 2015, 09:03:24 PM »
Over time you can easily do highly leveraged trading of bitasset against bitasset. It will have exactly the same risk normal leveraged forex trading, minus the counterparty risk and plus the systemic risk of BTS crashing. 20 years into the future and with enough traction bitshares could eat the entire forex market.

When one of the parties involved in this leveraged trade goes under as a result of a sharp move, and has insufficient collateral to back their position, how will this situation get handled?  The extra loss has to go somewhere.
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Offline arhag

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Re: swiss bank move was what we waited for... its here
« Reply #13 on: January 16, 2015, 10:11:35 PM »
Over time you can easily do highly leveraged trading of bitasset against bitasset. It will have exactly the same risk normal leveraged forex trading, minus the counterparty risk and plus the systemic risk of BTS crashing. 20 years into the future and with enough traction bitshares could eat the entire forex market.

I think we should make it cheap for anyone to create a new BitAsset where a BitAsset is defined by the tuple (unique ID, collateral asset type, margin call limit). It would also have a description, authority slate, and price feed definition associated with it. Majority approval of the authority slate could change the description, authority slate, or price feed definition. The price feed definition could be defined as either an arithmetic expression (actually only multiplication and division operations allowed) of other existing price feeds in the system, or the median price of the feeds published by the members of a particular price feed group (typically would be the same group of people as the members in the authority slate but don't necessarily need to be). By the default the authority slate could be set to the current 101 active delegates, or it can be assigned to any particular group of up to 101 BTS accounts.

So, for example I should be able to create a new BitAsset instrument where the collateral asset is defined as BitUSD, the margin call limit is set to 105%, I set the authority slate to some group of individuals I trust to maintain this asset class properly, I set the description to "1 Euro", and set the price feed definition to P1 / P2 where P1 = the existing BTS/BitEUR price feed published by the delegates and P2 = the existing BTS/BitUSD price feed published by the delegates. This creates a new fungible BitAsset instrument that allows for speculating on the price of the Euro relative to USD with up to 20x leverage (realistically less than that to avoid easily triggering margin calls). There is no additional price feed burden that doesn't already exist. People holding this asset understand it is highly leveraged and it might more easily become undercollateralized, and they accept that risk. Furthermore, they understand that the authority could potentially come to a consensus to change the price definition at any time. I also have ideas of how a quorum of the shorts and longs can come to a consensus to replace the authority slate.

When one of the parties involved in this leveraged trade goes under as a result of a sharp move, and has insufficient collateral to back their position, how will this situation get handled?  The extra loss has to go somewhere.

I also have ideas on how undercollateralization should be handled for BitAssets:

The worst case scenario for BitAssets right now is undercollateralization followed by a "bank run" (converting BitUSD to BTS) by everyone other than you, leaving you with the only remaining BitUSD with 0 BTS in collateral to back it and no one else willing to short BitUSD anymore. To fix that problem we need to make some tweaks to the system such as converting just enough of a fraction of everyone's BitUSD into a BitUSD-IOU at the moment undercollateralization would occur to prevent undercollateralization from happening. This additional uncollateralizated BitUSD-IOU liabilities may or may not be later automatically reconverted back into BitUSD as the blockchain earns further revenue from future short interest on BitUSD. But even if that never happens, all BitUSD holders take the same fair percentage cut rather than having the early movers get their full BitUSD value while the slow movers lose all of their BitUSD value.
« Last Edit: January 16, 2015, 10:17:22 PM by arhag »

Offline monsterer

Re: swiss bank move was what we waited for... its here
« Reply #14 on: January 16, 2015, 11:02:31 PM »
I dont see how fx traders would ever be interested in BitShares. The leverage is non-existent (its opposite of leveraged).

The main driving reason for leverage is that the basic unit of trade in forex is the lot, which is $100,000 - slightly prohibitive for the casual trader. So leverage lets them bet more reasonable amount of money. However, with bitshares there is no such barrier to entry, so arguably bitshares could be suitable for disenfranchised forex traders, once the other markets and liquidity become workable.
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