This Friday, OKEx provided an update to its traders regarding the gigantic unfilled futures contract looming over its exchange. As reported by Finance Magnates earlier this week, a trader on the Hong Kong-based exchange initiated a huge order, worth approximately $460 million, in long USD/BTC futures contracts.
According to a statement released by OKEx this Friday, the exchange attempted to contact the trader and get him/her to close some positions. The exchange stated that the trader refused to cooperate with them.
As a result, OKEx froze the trader’s account, preventing him/her from taking any more positions. Unfortunately, the positions the trader had already taken soon tumbled in value as bitcoin took a dive against the dollar.
This drop in value led OKEx to liquidate the account. At that point in time, the value of bitcoin was BTC 1 to $8040. As the trader had contracts for BTC 52,000 that meant the liquidated trades had a value of $418 million.
Changing the Face of AML with Self Service AnalyticsGo to article >>
With bitcoin falling in value, OKEx was unable to fill this trade. At settlement time, Friday at 16:00 HKT, bitcoin was valued at BTC 1 to $7480. This meant OKEx had to settle the trade for $389 million – leaving a $29 million, or BTC 3877, shortfall in cash.
OKEx Insurance Fund
As noted in our last piece on OKEx, in situations such as this the exchange has an insurance fund to cover the costs. Up until Friday, this fund contained BTC 10 – not quite enough to fill a gap of BTC 3877.
Luckily for OKEx traders, the exchange confirmed that it had injected an extra BTC 2500 into the insurance fund before settlement time this Friday. Presuming this was in addition to the existing BTC 10, that still left traders with a shortfall of BTC 1367.
How will this be covered, you ask? OKEx operates a clawback scheme. As noted in our previous article, that means that in situations such as this, the exchange takes an equal percentage of the profits from money making trades to cover those outstanding costs.
In this instance, that means OKEx’s profitable traders are going to have to pay a clawback rate of 17 percent. Not great obviously – who likes have any of their money taken? – but still much better than the approximately 40 percent rate that would have occurred had OKEx not injected those extra funds.