OKEx has announced today they will put down some $20 million worth of BTC to cover the largest liquidation in history that closed a half a billion dollars position on August 1st. In a statement today, OKEx said:
“The client with user ID 2051247 initiated an unusually large long position order (4168515 contracts) at 2am on July 31 (HKT) and triggered our risk management alert system.
Our risk management team immediately contacted the client, requesting the client several times to partially close the positions to reduce the overall market risks.
However, the client refused to cooperate, which lead to our decision of freezing the client’s account to prevent further positions increasing.
Shortly after this preemptive action, unfortunately, the BTC price tumbled, causing the liquidation of the account.
To reduce the market risks induced by this incident, the following actions will be executed:
OKEx said the above will “largely reduce the socialized clawback ratio of this week,” but it appears like at least another 1,000 to 1,500 btc, worth some $7 million, will have to be covered by traders’ profits.
That means everyone who had a long or short position across OKEx’s three futures contracts and made a profit, will see some of that profit reduced by a currently unknown percentage.
Socialized losses apply the same percentage to the poor and the rich alike, but OKEx says they are taking a number of measures to prevent similar situations.
They faced considerable criticism for allowing this huge position to build up, which might partly be why they intervened to put down such a huge amount of their own capital.
Now they say a new somewhat complex system is to be set up whereby position sizes depend on all sorts of laddered variables.
That should hopefully reduce any anger from traders who choose this exchange because it has been around for years without facing any hacks and because it has or had considerable liquidity that is unmatched.
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