Author Topic: Margin Call Explanation & Beware of Illiquid Markets with Low Margin  (Read 11584 times)

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Offline Troglodactyl

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Re: Margin Call Explanation & Beware of Illiquid Markets with Low Margin
« Reply #30 on: October 17, 2015, 08:44:15 pm »
Market competition will cause sellers of usd to move closer to feed.   Why let someone else pocket 1.5 when you are still happy with 1.4.   If you want to go short now you must sell at a price people will but

This is not how the system works.  There is no reason to compete to sell assets cheaper than the MSSR level as long as there are active margin calls because orders will be matched at MSSR.  If MSSR is 150% as it was before, that guarantees that there will never be liquidity near the feed, which then causes ridiculously high collateral requirements because the market is illiquid.  Then those additional margin calls caused by the inflated collateral requirement flood the market with BTS at prices no one would sell at by choice and crash the price, causing a cascade of additional margin calls.

Offline Troglodactyl

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Re: Margin Call Explanation & Beware of Illiquid Markets with Low Margin
« Reply #31 on: October 18, 2015, 02:23:46 am »
Cool, so now how do we vote on these parameters?

Currently by voting for witnesses who support the values you want.  But there's a pretty solid case for moving that to committee members and leaving the witness role more purely technical and neutral.  Moving those parameters to the committee would of course require an update.

Offline maqifrnswa

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Re: Margin Call Explanation & Beware of Illiquid Markets with Low Margin
« Reply #32 on: October 18, 2015, 04:07:33 am »
If you make it closer to the SWAN than the FEED then you lose the benefit of outside information provided by the price feed.  Namely, someone with high collateral already has a very low CALL price (derived from SWAN) .  It would also have the effect of disabling any possibility of doing a margin call between SWAN and SQP.

I'm not saying it should be closer to SWAN than FEED, just that SQP should be in units of SWAN, not FEED. That is because the amount of SQP you want is a function of market collateralization, not FEED. This way if collateralization changes, but feed price stays the same, SQP should also change.
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Offline BTSdac

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Re: Margin Call Explanation & Beware of Illiquid Markets with Low Margin
« Reply #33 on: October 21, 2015, 08:38:23 am »
please use simple words to explain this ,
I think original intention is to make many people use this ,because there need market deep .
but I think less people can make it clear

and now in message board of btc38.com ,there are a little rumour that committee change parameter cause many people been margin .
to my understand , it is not trust , but I don`t know the details
I try to understand it ,
1.SQP is the initially collateral , that is minimum initially collateral when people borrow BTA ? 
2.
Margin is called any time the HIGH BID is less than the CALL PRICE.    In other words anytime the highest offer to buy the collateral and pay off the debt is below the call price.
HIGH in above sentence is in BTS/BITUSD  or BITUSD/BTS?
BM can you explain the details ?
« Last Edit: October 21, 2015, 09:04:20 am by BTSdac »
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Offline tonyk

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Re: Margin Call Explanation & Beware of Illiquid Markets with Low Margin
« Reply #34 on: October 21, 2015, 08:56:55 am »
please use simple words to explain this ,
I think original intention is to make many people use this ,because there need market deep .
but I think less people can make it clear

and now in message board of btc38.com ,there are a little rumour that committee change parameter cause many people been margin .
BM can you explain the details ?



I like your font size selection!

+  1
« Last Edit: October 21, 2015, 09:00:15 am by tonyk »
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline botfund

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Re: Margin Call Explanation & Beware of Illiquid Markets with Low Margin
« Reply #35 on: October 21, 2015, 11:11:52 pm »
A margin call will occur any time the highest bid is less than the CALL PRICE and greater than SQP


The current rule makes the order book look silly and I think this should be changed to something like:

A margin call will occur any time the highest bid is greater than SQP and CALL PRICE is greater than SQP.

Edit: I remember there had been the same bug in BTS1 and we have it now again.
 
 
« Last Edit: October 21, 2015, 11:19:56 pm by botfund »

Offline bytemaster

Re: Margin Call Explanation & Beware of Illiquid Markets with Low Margin
« Reply #36 on: October 22, 2015, 02:41:08 pm »
The SQP defines the most that a margin position will ever be forced to pay to cover (that is it).   It is there only to protect against thin markets.
A margin position will be forced to sell its collateral anytime the highest offer to buy the collateral is less than the call price (USD/BTS).   

The market defines everything (as it should).
The market sets the value of BTS in terms of BitUSD based on the highest offer to buy BTS with BitUSD.
Once we know the market value, we can trigger margin calls.

There is ONE edge case and that is for thin markets.  In this edge case the market cannot define the value of BTS in terms of BitUSD.  This is where we use the SQP as the lower bound on the value of BTS in terms of BitUSD.

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Offline tonyk

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Re: Margin Call Explanation & Beware of Illiquid Markets with Low Margin
« Reply #37 on: October 22, 2015, 04:26:14 pm »
The SQP defines the most that a margin position will ever be forced to pay to cover (that is it).   It is there only to protect against thin markets.
A margin position will be forced to sell its collateral anytime the highest offer to buy the collateral is less than the call price (USD/BTS).   

The market defines everything (as it should).
The market sets the value of BTS in terms of BitUSD based on the highest offer to buy BTS with BitUSD.
Once we know the market value, we can trigger margin calls.

There is ONE edge case and that is for thin markets.  In this edge case the market cannot define the value of BTS in terms of BitUSD.  This is where we use the SQP as the lower bound on the value of BTS in terms of BitUSD.

You still do not see how this whole theory of yours hangs on the market participants exhibiting illogical behaviour, do you?
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline bytemaster

Re: Margin Call Explanation & Beware of Illiquid Markets with Low Margin
« Reply #38 on: October 22, 2015, 10:52:22 pm »
The SQP defines the most that a margin position will ever be forced to pay to cover (that is it).   It is there only to protect against thin markets.
A margin position will be forced to sell its collateral anytime the highest offer to buy the collateral is less than the call price (USD/BTS).   

The market defines everything (as it should).
The market sets the value of BTS in terms of BitUSD based on the highest offer to buy BTS with BitUSD.
Once we know the market value, we can trigger margin calls.

There is ONE edge case and that is for thin markets.  In this edge case the market cannot define the value of BTS in terms of BitUSD.  This is where we use the SQP as the lower bound on the value of BTS in terms of BitUSD.

You still do not see how this whole theory of yours hangs on the market participants exhibiting illogical behaviour, do you?

I don't see the illogical behavior.  Please explain.
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Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline maqifrnswa

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Re: Margin Call Explanation & Beware of Illiquid Markets with Low Margin
« Reply #39 on: October 23, 2015, 01:25:56 am »
You still do not see how this whole theory of yours hangs on the market participants exhibiting illogical behaviour, do you?

I don't see the illogical behavior.  Please explain.

I think this is his point:  The market defines the value of BitUSD, however, in order to margin call someone has to be winning to (illogically) pay less for a BitUSD than the market defined.  What happens if the market is not thin, and 1 BitUSD = 1.15 USD worth of BTS? What is the reason someone should expect the price of BitUSD relative to USD to drop?

At the same time, I don't think it is illogical -- I think there is a reason to expect that BitUSD relative to USD will drop, and SQP is part of the reason. If 1 BitUSD > 1 USD, that means there are too few BitUSD. SQP means no BitUSD will be automatically destroyed (margin called), but people are still free to create BitUSD. The supply of BitUSD relative to USD is expected to increase, therefore the value of BitUSD relative to USD should drop.
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Offline tonyk

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Re: Margin Call Explanation & Beware of Illiquid Markets with Low Margin
« Reply #40 on: October 23, 2015, 04:08:56 am »
The SQP defines the most that a margin position will ever be forced to pay to cover (that is it).   It is there only to protect against thin markets.
A margin position will be forced to sell its collateral anytime the highest offer to buy the collateral is less than the call price (USD/BTS).   

The market defines everything (as it should).
The market sets the value of BTS in terms of BitUSD based on the highest offer to buy BTS with BitUSD.
Once we know the market value, we can trigger margin calls.

There is ONE edge case and that is for thin markets.  In this edge case the market cannot define the value of BTS in terms of BitUSD.  This is where we use the SQP as the lower bound on the value of BTS in terms of BitUSD.

You still do not see how this whole theory of yours hangs on the market participants exhibiting illogical behaviour, do you?

I don't see the illogical behavior.  Please explain.

well, the traders got it...minutes after the post (congrats to 850+ USD seller,btw ). But that is just an interesting observation, not why I am writing this.
-------------

Are you willing to accept a lemma:

if you are selling  something for 100 UDS [so much selling that you are ready and put in the order book], you will be more than willing to sell it for 120 USD [mind you faster]?
« Last Edit: October 23, 2015, 04:22:46 am by tonyk »
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline tonyk

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Re: Margin Call Explanation & Beware of Illiquid Markets with Low Margin
« Reply #41 on: October 25, 2015, 04:47:58 am »
So, I assume you do not agree that one, acting logically, will always take a better price for her trade  when offered a chance.


Put in other words - in this theory of yours,  all sellers have some sense of value they expect to get for whatever they are selling. Moreover this value judgment is independent and not effected by any objective signals from the reality they live in.
« Last Edit: October 25, 2015, 05:06:08 am by tonyk »
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline tonyk

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Re: Margin Call Explanation & Beware of Illiquid Markets with Low Margin
« Reply #42 on: October 25, 2015, 05:17:42 am »


In the above example order book, you believe the sell orders below 291 make sense...more dangerously you have based you system on the assumption that people will just act like that...   irrationally.



PS
In more general terms what you call "Short squeeze protection" is the complete opposite - It is the "Shorts' fuck up ratio" aka with what percentage exactly you can screw up the shorts, as per the system design.

Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

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Re: Margin Call Explanation & Beware of Illiquid Markets with Low Margin
« Reply #43 on: October 25, 2015, 07:15:20 am »
@tonyk
Please express your thoughts in a more comprehensive way so that others can participate in the discussion.
You might be right about something important but unless you express yourself in a more verbose way, this looks like a private conversation meant only for those who are able to guess what you mean.

Offline xeroc

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Re: Margin Call Explanation & Beware of Illiquid Markets with Low Margin
« Reply #44 on: October 28, 2015, 02:34:22 pm »
The SQP defines the most that a margin position will ever be forced to pay to cover (that is it).   It is there only to protect against thin markets.
A margin position will be forced to sell its collateral anytime the highest offer to buy the collateral is less than the call price (USD/BTS).   

The market defines everything (as it should).
The market sets the value of BTS in terms of BitUSD based on the highest offer to buy BTS with BitUSD.
Once we know the market value, we can trigger margin calls.

There is ONE edge case and that is for thin markets.  In this edge case the market cannot define the value of BTS in terms of BitUSD.  This is where we use the SQP as the lower bound on the value of BTS in terms of BitUSD.

You still do not see how this whole theory of yours hangs on the market participants exhibiting illogical behaviour, do you?

I don't see the illogical behavior.  Please explain.

Do margin calls buy bitUSD left or right of the SQP in your figure abote (0.005 bitUSD/BTS)
if they only buy on the right hand side of the SQP than I do understand tony, because they only execute if there are no orders there ..
so I assume they buy on the left hand side of the SQP .. which would make them pay "more" than the SQP in BTS-terms to aquire bitUSD .. but you said is the "MOST they have to pay to cover" would be misleading since the best they can do (cheapest) is AT the SQP and it only gets more expensive the less orders/volume there are ..

Maybe that is what confuses tony (and me)!?

So, margin calls occure when the highest bid is less than the margin call price (which is a function of the SWAN price and the maintenance collateral ratio) AND the SQP crossed the margin called price and is thus left (read: smaller) of it ..

but WHERE do margin calls execute? which orders are bought at which prices and what are the limits for the margin call?
« Last Edit: October 28, 2015, 02:36:32 pm by xeroc »
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