Difference between revisions of "Talk:ICBIT"
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| − | No, Fireball, ''you'' misunderstand how exchanges work, and you do not appear to understand what [http://en.wikipedia.org/wiki/Credit_risk#Counterparty_risk Counterparty Risk] is. You write "and when any user from loosing side goes bankrupt, central counterparty (aka exchange) has to pay its own money. We do that, but we can't do that all the time, and we can't guarantee it happens ''''all the time''''," -- then you are not a central counterparty | + | No, Fireball, ''you'' misunderstand how exchanges work, and you do not appear to understand what [http://en.wikipedia.org/wiki/Credit_risk#Counterparty_risk Counterparty Risk] is. You write "and when any user from loosing side goes bankrupt, central counterparty (aka exchange) has to pay its own money. We do that, but we can't do that all the time, and we can't guarantee it happens ''''all the time''''," -- then you are not a central counterparty ''all the time''. It's just that simple. When you're ready to do that all the time like COMEX and OMX do, announce it publicly and you'll be an exchange (at least in that essential respect). Until then stop posting factually incorrect information on the wiki. |
If I buy a call option from on Nasdaq OMX and it is cleared against a sell order by Bob Jones of Louisiana, I am not exposed to Bob Jones' bankruptcy. If I buy a COMEX contract for delivery of gold and it is cleared against a sell order by Joe Schmoe of Zimbabwe, I am not exposed to Joe Schmoe's bankruptcy. Without this, COMEX and OMX would not be exchanges. Note that this is in stark contrast, to, say, credit default swaps which are not centrally cleared. And, in fact, note that there is no credit default swap exchange since CDS don't have a central counterparty. | If I buy a call option from on Nasdaq OMX and it is cleared against a sell order by Bob Jones of Louisiana, I am not exposed to Bob Jones' bankruptcy. If I buy a COMEX contract for delivery of gold and it is cleared against a sell order by Joe Schmoe of Zimbabwe, I am not exposed to Joe Schmoe's bankruptcy. Without this, COMEX and OMX would not be exchanges. Note that this is in stark contrast, to, say, credit default swaps which are not centrally cleared. And, in fact, note that there is no credit default swap exchange since CDS don't have a central counterparty. | ||
Revision as of 23:11, 13 August 2013
Please stop deleting material from this page. For a very long time ICBIT's webpage clearly explained that it was not a central counterparty. Now it's been changed to something absurdly self-contradictory that essentially says "we call ourselves a central counterparty but we aren't one and we explicitly deny the responsibilities that define the role of a central counterparty". The whole point of having a futures exchange is that you're exposed to credit risk from only one party and you know who that party is (the exchange). ICBIT is not doing that. If they decide to do that and say so publicly, then feel free to change this page, but unless/until then please stop deleting important facts. Eldentyrell (talk) 16:04, 13 August 2013 (GMT)
First of all, finally thank you for taking this into Discussion page. The thing is that you seem to misunderstand how exchanges work. Indeed, ICBIT acts as a counterparty to all futures contracts trades happening, and all major fiat money futures exchanges out there do the same.
That means that if one trader buys 2 BTC/USD contracts, counterparty is ICBIT, and it is also counterparty to those traders who sold these 2 contracts!
Graphically:
Trader 1 Trader 4 Trader 2 <==> ICBIT <==> Trader 5 Trader 3 Trader 6
Now, the most important fact: Sum of all money paid by loosing users equals to sum of all money paid to profiting users!
And when any user from loosing side goes bankrupt, central counterparty (aka exchange) has to pay its own money. We do that, but we can't do that all the time, and we can't guarantee it happens all the time, so that's why we say that we guarantee to pay as much, as loosing traders are able to pay.
Again, that's absolutely same to how fiat-money "real-world" exchanges work. They have reserve funds, and they often go bankrupt (lookup recent Hong Kong's derivatives market bankrupcy, for example).
No, Fireball, you misunderstand how exchanges work, and you do not appear to understand what Counterparty Risk is. You write "and when any user from loosing side goes bankrupt, central counterparty (aka exchange) has to pay its own money. We do that, but we can't do that all the time, and we can't guarantee it happens 'all the time'," -- then you are not a central counterparty all the time. It's just that simple. When you're ready to do that all the time like COMEX and OMX do, announce it publicly and you'll be an exchange (at least in that essential respect). Until then stop posting factually incorrect information on the wiki.
If I buy a call option from on Nasdaq OMX and it is cleared against a sell order by Bob Jones of Louisiana, I am not exposed to Bob Jones' bankruptcy. If I buy a COMEX contract for delivery of gold and it is cleared against a sell order by Joe Schmoe of Zimbabwe, I am not exposed to Joe Schmoe's bankruptcy. Without this, COMEX and OMX would not be exchanges. Note that this is in stark contrast, to, say, credit default swaps which are not centrally cleared. And, in fact, note that there is no credit default swap exchange since CDS don't have a central counterparty.
Stop vandalizing the page with your marketing propaganda.
Eldentyrell (talk) 23:10, 13 August 2013 (GMT)
