I think this debate sometimes useless , we should focus on the following question
1. Does must need settlement ?
Yes , I think ,must need , the purpose of settlement is to keep BTA( bitcny) value , describe it by formula is bitcny:cny >=1, it mean bitcny (more or less ) more valuable than cny .
2.what is withdraw of settlement?
Shorter have a risk of force settlement though he has a high collateral, we know short is a exchange with 2 times lever, if you also use the borrowed bitcny buy bts . so it have high profit/risk. I think it is reasonable .
3. what we can improve?
3.1 consider just keep bitcny:cny >=0.995, it mean the settle price is 0.995*feed price ( BTS/CNY, it is 1.005, if use CNY/BTS)
3.2 Settle price is when settle execute or the average price of 24 hours before execution as tonyk`s suggestion
I have a solution for your attack alt - use not last feed price but the 24h average price. It seems like 'expensive' operation but the fee is 1000BTS so it should cover it.