Many users who are new to BitMEX, but familiar with OKCoin and Bitfinex ask many of the same questions. This guide is meant to explain some of the major differences in how BitMEX operates.
|Product||Currency||Contract Length||Settlement||Maximum Leverage|
|XBT Quarterly Future||USD||Three Months||Last Friday of the Expiry Month at 12:00 UTC||100x|
|XBT Biquarterly Future||USD||Six Months||Last Friday of the Expiry Month at 12:00 UTC||100x|
BitMEX is the first exchange to launch a perpetual contract. This means that you do not need to worry about rolling your position at a fixed point in the future since there is no expiry. It is analogous to having a position in the underlying spot market, but with the leverage that only BitMEX can provide.
|Exchange||Contract Length||Contract Type||Liquidation Event||Contract Loss Mechanism|
|BitMEX||Perpetual / Quarterly||Inverse||Index Mark Price||Auto-Deleveraging|
|Bitfinex||Margin Product||Linear||Last Traded Price||Socialised Loss and Token Issuance|
|OKCoin||Weekly / BiWeekly / Quarterly||Inverse||Last Traded Price||Full Account Clawback|
|BTCC Pro||Perpetual||Linear||Last Traded Price||Auto-Deleveraging|
|BitVC||Weekly||Inverse||Last Traded Price||Auto-Deleveraging|
|CryptoFacilities||1W, 2W, 3W, 1M, 3M, 6M, 9M||Inverse||Index Mark Price (+/- Premium / Discount)||Auto-Deleveraging|
Unlike some of our competitors, BitMEX uses the underlying index price for purposes of margin calculations, not the last traded price. This means that a malicious trader cannot manipulate the order book and cause erroneous liquidations. BitMEX employs a system known as Fair Price Marking to adjust the index price due to basis or funding.
Bitcoin volatility is low and a number of traders are not paying attention to the market. One trader notices that he could move the price by as much as 5% with a large buy and thinks he can cause short positions to liquidate and thus close his long position into the short liquidated orders (a process known as short squeezing).
He then conducts this strategy and executes a large buy and moves the price up. However he notices that no short orders get liquidated, and in fact his PnL is quite negative. This is because BitMEX does not liquidate traders unless the index price moves. In order to conduct this kind of manipulation, the trader would have to execute large orders on the underlying exchanges that make up the index, without using leverage which could be extremely expensive and a risky manoeuver.
BitMEX employs a variety of methods to mitigate loss on the system. Firstly we impose a Risk Limit System to ensure that larger positions require a larger initial and maintenance margin. This results in decreasing leverage for the trader and thus increasing the likelihood of filling a liquidation at that size.
BitMEX overlays this with a sophisticated Liquidation Process which attempts to avoid liquidation on a position by increasing users’ maintenance margin requirements by either dropping them down to lower risk limit tiers, or cancelling any existing open orders that are taking up margin.
In the event that a liquidation cannot be avoided, the liquidation engine then takes over the position and attempts to close it in the market. If the liquidated order cannot be filled, BitMEX then employs the Auto-Deleveraging System (ADL). ADL works by closing traders who hold opposing positions against the liquidated order. The system closes traders according to leverage and profit priority. That is, highly leveraged traders get closed out first.
BitVC, BTCC Pro and CryptoFacilities also engage in a method of Deleveraging as their contract loss mechanism. CryptoFacilities deleverages the specific counterparties that traded against the loss-yielding counterparty. BTCC Pro closes traders who profited from correctly timed bottoms or tops, and BitVC closes profitable traders’ proportionately.
OKCoin employs a “Socialised Loss” method, whereby their system calculates the total loss and spreads it out proportionately to traders who have made a profit on their position during the contract’s delivery or settlement.
|Exchange||Max Leverage||Initial Margin||Maintenance Margin|
There are some differences in how Maintenance Margin (MM) is used on the different platforms. On BitMEX, OKCoin and BTCC Pro the MM is the level at which a forced liquidation of the user’s total position occurs.
Bitfinex issues a margin call at the MM level where the system starts to liquidate the user’s position until there are enough funds to satisfy the minimum MM level of 15%.
BitVC applies a similar methodology to Bitfinex. First, margin calls are issued when the margin level drops between 3% to 1%. If it drops below 1% they will begin to force liquidate the user’s largest positions until their margin satisfies the 1% minimum. During this liquidation event, the user will not be able to trade further on his account.
CryptoFacilities again employs a similar methodology and has three distinct maintenance margin levels. Firstly at their MM level of approximately 1.75%, a margin call is issued and gives the user 24 hours to deposit additional margin or sell positions to bring their margin level back above the MM. If the user fails to do so within 24 hours, the system closes some or all of the user’s position to bring the margin back above the MM level.
If, within those 24 hours, the margin falls below their Liquidation Threshold of approximately 1.5% then some or all of the user’s positions will be liquidated immediately to satisfy MM requirements.
Finally, if the user’s margin falls below the Termination Threshold of approximately 0.5% then all of the user’s open positions are liquidated and the user’s portfolio value will be zero.
Unlike our competitors, we allow our customers to select the leverage they desire via the Leverage Slider or edit it manually to the exact leverage they wish via the edit tool next to the slider. Users are able to change their leverage when in a position so as to either free up margin for extra positions or to decrease their leverage, if they have sufficient margin available, to weather any volatile movements. For further reading on this please see Isolated Margin.
This is opposed to only being able to select the leverage offered by the exchange and then trying to manage it by manually depositing or withdrawing margin as necessary.
|Exchange||Reference Price||Weighting||Index Constituents||Settlement Procedure|
|BitMEX USD Perpetual||.BXBT BitMEX Index||Equal Weighted (1/2)||Bitstamp, GDAX||No settlement.|
|BitMEX USD Futures||.BXBT BitMEX Index||Equal Weighted (1/2)||Bitstamp, GDAX||Settled at a 30-Minute TWAP|
|Bitfinex||Bitfinex BTC / USD Spot Price||100%||Bitfinex||Last spot price|
|OKCoin||OKCoin internal formulated Index||Equal Weighted (1/6)||Bitfinex, Bitstamp, OKCoin.com, OKCoin.cn, BTCC, Huobi. CNY exchange rates set weekly according to a 2-week average rate||1-Hour arithmetic mean|
|BTCC Pro||BTCC internal formulated Index||Equal Weighted (1/3)||BTCC, Huobi, OKCoin.cn||No settlement. Rebalanced at Mark Price|
|BitVC||BitVC internal formulated Index||Equal Weighted (1/2)||Huobi, OKCoin.cn||1-Hour VWAP|
|CryptoFacilities||CryptoFacilities internal formulated Index||No weighting. Median price used||Bitfinex, Bitstamp, BTC-E, Coinbase, Gemini, ItBit (An exchange is excluded if it contributes <5% volume, reviewed quarterly)||If closed prior to settlement then marked at Index Price. At settlement, trading closes at 16:00 UTC and settled at the 1 VWAP between 16:30 UTC and 17:30 UTC|
Most manipulation in a derivative instrument can occur at settlement since a trader may find it easier to have their position automatically settled than attempting to close that position in the market (as the trader might incur deep market impact costs). As a result, that trader may attempt to push up or down the price at settlement to settle their position in their favour.
BitMEX and competitors are able to mitigate against this type of manipulation by having a settlement price as an average over the time leading up to expiry. As a result this helps to smooth any sudden price movements. Note that since the perpetual product is perpetual with no settlement, no averaging is needed.
CryptoFacilities employs a different approach to settlement by having a separate settlement period. If a trader does not close their position by 16:00 UTC on the Last Trading Day then their position settles at 18:00 UTC according to a 1 hour Volume Weighted Average Price (VWAP) between 16:30 - 17:30 UTC. Hence, a trader will be exposed to 1.5 hours of Bitcoin price movement over this time and won’t be able to open or close any other positions on the platform.
|Exchange||Minimum Contract Size||Bitcoin Equivalent|
|BitMEX USD Perpetuals||1 USD||~ 0.0007 BTC|
|BitMEX USD Futures||1 USD||~ 0.0007 BTC|
|OKCoin||100 USD||~ 0.07 BTC|
|BTCC Pro||1 BTC|
|BitVC||100 CNY||~ 0.012 BTC|
On BitVC and OKCoin, the contract sizes are a specific fiat amount but you can place an order as a quantity in Bitcoin. Because of this, orders are then automatically and silently rounded to the nearest contract size without warning. With the large contract size on OKCoin (100 USD), this can mean a trader may take on significantly more risk than intended. This risk is still present on BitVC but less so given the contract size is smaller (100 CNY ~ 15 USD).
On OkCoin if you want to go long 0.1 XBT at $700 then your order will actually turn out to be long 0.142 XBT, adding extra risk to your position than requested.
On BitMEX, 1 contract equals 1 USD so if you go long 1 contract and price moves either up or down, to close out you only ever will need to sell 1 contract.
On some of our competitor’s exchanges, users are able to open both a long and a short position on the same contract at the same time. Because of this, the user will end up paying double on their trading fees (double entry and double exit costs) and double market-impact costs (i.e. crossing the spread). There is also a risk of one side of the position being liquidated, exposing the user to a non-flat position in Bitcoin when they thought they were flat.
On BitMEX this does not happen, positions are netted against each other and you will be only charged fees on one entry and one exit. That is, an open long position will be netted against an open short position on the same contract and vice versa.
On OKCoin, you can be long 100 contracts and simultaneously short 100 contracts, effectively having two positions on but having zero-price exposure to Bitcoin. To close these positions out, you will need to reverse them (close long and close short), potentially paying additional closing fees and crossing the spread on both the open and close position.
On BitMEX, if you are long 100 contracts of the XBTUSD Perpetual Contact (for example), then to close the position you simply sell 100 contracts into the market. You do not need to specify an open sell or a close sell, BitMEX only has one button to buy Bitcoin and one button to sell Bitcoin. Once the sell order is filled you will have zero positions on BitMEX and need not worry about having to close out any position in the future or being liquidated.