As one of the community's most active traders and from a financial market theory perspective, i support @pc perspective on this. I also share @Empirical1.2 frustrations in having many short positions force settled on me; however, I've been on the settlement initiation side of trades many times and it is a very valuable feature.
@pc is correct that this is mainly an issue in bear markets. From personal experience, it has SUCKED pouring more and more collateral into my shorts just to keep them open, but that's a reasonable price to pay for the leverage on the upside when market conditions reverse, and for the fact that I've sold all of my short assets at premiums to begin with.
#1 priority is to guarantee parity with the underlying asset. Forced settlement seems the best way to do this. We cannot compromise on this priority or we lose one of our biggest value propositions in the smartcoin market.
#2 there are times when asset holders, mainly Chinese CNY from my experience, value immediate liquidation and so put their assets up for sale at discounts to the feed price; this is where market makers like myself and @JonnyBitcoin come in, buy at a discount, and settle for some risky profit (risky in that the feed can fluctuation in the next 24 hours).
#3 we all know the rules of the game going into any trade, these are built into our expectations ex ante, and so the prices we choose to initiate ought to compensate for the risk of forced settlement.
What could be improved is the old idea we've punted in this community about compensating short positions with some sort of yield on collateral. This would further incentivize short initiations, especially in bear markets. Once we're back to a bull market, it'll be irrelevant.
I was reading all comments and opinions about this proposal.
After considering the case I decided to vote against the BSIP 16 and to not support a change of the CNY settlement parameters.
PC made his point clear enough that we should not break the trust in the guarantee of getting at least 1 CNY back. This could have another negative impact on the BitShares ecosystem and further harm our reputation in the crypto community. I think the current settlement parameters are fine and the spread will get tighter when volume picks up. Please don't forget we are at the beginning of this payment platform and we see many anomalies due to low volumes.
I also think that market makers like cylonmaker2053 and JonnyBitcoin know the trading risks and can evaluate the associated risks and potential profits. Shorting and providing liquidity is not for everyone and should be handled by experts who know how to create a derivate. I am looking forward to adding bankers to the BitShares platform so that they can add their market expertise and help us with the market creation. Creating a derivate is banking 101. Just replace BTS with USD and every banker knows what you are talking about.
cheers Chris4210
I haven't expected that it's so difficult to push such a change.
China community is the main bitCNY ecosystem, here users can deposit/withdraw bitCNY with fiat, most of the users support this change, but seems their opinion is less important than some outside speculators'?
Bitshares is a decentralized platform, anyone can short if he like, this is simple trading, no need to suppose only seldom experts can/should do that.
if shorters are forced to sell his collateral without any compensation when the collateral price is above the margin call price, there is no reputation on this system. you guys always mention "guarantee" to holders, but who has thought in the place of shorters?
we cannot expect a financial system where everyone like to hold but seldom like to short can grow big enough.
if we do not change, shorters will always worry of being force settled and we can not expect enough supply of bitCNY.
20+ days left for the committee proposal, let's see what will happen.
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