Upcoming changes in our margin trading feature
In an ongoing effort to provide our customers with the best possible trading experience, we are pleased to announce several enhancements to our swaps system. As the swaps market continues to grow, we continue to be extremely focused on ensuring that it operates as fairly and efficiently as possible, while mitigating systematic risks to the greatest extent possible.
Self Funding: To the extent that a trading wallet’s collateral is the correct currency, it will now be automatically used to offset the position’s swap requirements. For example, if a trading wallet contains USD, and the position is long BTCUSD, the USD borrowing requirement will be reduced by the amount of USD collateral. We believe that this change will result in significant cost savings to traders and help make the closely watched aggregate swap statistics more meaningful. This new feature essentially allows traders to pay no swap interest when the positions size is less than their collateral, i.e., “unlevered” (provided, of course that the collateral is held in the correct currency), and avoids the clumsy process of claiming unlevered position as this feature effectively enables traders to perform the economic equivalent of a “partial claim” when the position is reduced in size of more of the correct collateral is deposited in the trading wallet.
Daily Settlement: Up until now, swap interest to liquidity providers has always been paid daily, but swap interest from traders is only collected when the positions is closed. While this makes sense from a certain perspective, it has the unintended consequence of effectively putting Bitfinex in the position of making 0% loans to cover the payments imbalance created by large “unrealized swap” balances, which really should be serviced by the P2P facility that we already have in place. Moreover, from a balance sheet perspective, we feel that it simply makes more sense to match the frequency of the collection and payment process. In order to implement this change, traders will need to select how they wish these daily payment to be made. The system will support a new variable for each position, “Swap Type”, which can have one of two values:
- Daily (default): Swap interest will be automatically deducted from the collateral in trading wallet of a daily basis. If the correct currency is not present, an appropriate conversion will be performed to satisfy the payment.
- Term: Swap interest will be capitalized in to position every night by automatically accessing swap offers to cover the required payment.
Existing positions will be phased into this process, with daily “catch-up” payments of no more than 10,000 USD.
These first changes will be active on the 21st of July, 2014.
Real-time Autorenew: In the past, the “autorenew” feature for offering swap liquidity was only processed once every 15 minutes, which could sometimes create an offer “vacuum” if large positions were being opened and closed quickly during periods of heightened volatility. We have reduced that interval to less than one minute as we approach a true real-time solution to this important feature.
Swap “Bot”: We will soon be offering traders the ability to automatically replace the swaps that fund their positions with cheaper ones should they be available at the same or better terms, eliminating the rather laborious manual process that is available today. There are many nuances to making this work efficiently and it will be offered on an “opt in” basis, but we anticipate that this feature will make the swap market much more efficient and reduce volatility in the average swap rates. We will provide further updates on the specific functionality by the end of July.
Once again, we wish to thank all of our customers for their continued loyalty, which, in recent months, has made Bitfinex the number one platform for BTCUSD liquidity as measure by trailing 30 day volume. We look forward to serving the community’s ongoing trading needs as we continue to update and improve our trading platform. As always, we welcome your feedback.