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Trading Engine Interruption, 20 December 2019

Trading Engine Interruption, 20 December 2019

05 Feb 2020 Post

11 UTC and 04:53:47 UTC on 20 December 2019, the trading engine stopped

If I knew the answers to questions 1 and 2, HDR Long Term Capital Management would not be a figment of my imagination, but a fee-guzzling hedge fund posting returns that rival Renaissance Technologies. By the way, I recently read somewhere that since its inception, Ren Tech earned over $100 billion in net gains AFTER fees of 4 and 40. Jim Simons is the Samuel L Jackson of investing; he is one bad ass mother fucker.

As the CEO of the largest crypto derivatives trading platform, I do however have a somewhat informed opinion on the third question. For those of you ringing in 2020 with a resolve to read even less text and more Instagram here is the summary:

These are the three questions any self-respecting crypto punter asks themselves:
  • When moon?
  • When Lambo?
  • When liquid options?

As the CEO of the largest crypto derivatives trading platform, I do however have a somewhat informed opinion on the third question. For those of you ringing in 2020 with a resolve to read even less text and more Instagram here is the summary:

If I knew the answers to questions 1 and 2, HDR Long Term Capital Management would not be a figment of my imagination, but a fee-guzzling hedge fund posting returns that rival Renaissance Technologies. By the way, I recently read somewhere that since its inception, Ren Tech earned over $100 billion in net gains AFTER fees of 4 and 40. Jim Simons is the Samuel L Jackson of investing; he is one bad ass mother fucker.

Delta One Dominance

Traders use delta one products to obtain leveraged directional exposure to an asset. Traders always want more leverage when they are prescient; that’s how you earn more ducats. Traditional trading platforms and exchanges, baring shady CFD brokers / bucket shops, offer limited leverage.

Unless you are a very large hedge fund, bank, or financial institution, you will not have access to a large amount of leverage. Exchanges endeavor to protect their seat holders who are on the hook for bankrupt traders by limiting leverage. The most liquid equity futures contract globally is the CME’s Globex S&P E-mini contract. I believe the maintenance margin offered by the exchange equates to max 5x leverage. 5x leverage ain’t the nuts when a large daily move in the underlying is considered 1%.

Brokers may offer higher leverage trading FX pairs, but obtaining 100x or greater leverage is getting increasingly difficult. Even if you can obtain high leverage, these exchanges or brokers do not limit your liability. When the Swiss National Bank removed the CHF/EUR peg in January 2015, a few shops sued customers for large losses.That’s not a good look.

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