Bitcoin future (BRR) at IB, 200,000 USD margin requirement?

Discussion in 'Interactive Brokers' started by GRULSTMRNN, Jun 26, 2019.

  1. Robert Morse

    Robert Morse Sponsor

    I will tell you a clearing broker is only interested in what that symbol can do in the next few hours or days, not over years. We are all making too big a deal over this. This is a business decision they made for their business so the risk managers can keep their jobs, not to protect the client or other clients. Just that simple. You get a vote with your money. If you feel their rules are too confining, walk with your money. Or, stay and abide. We all have rules like this that clients might not like.
     
    #31     Jun 27, 2019
  2. We are talking a max 1 weekend here, name me one single futures contract on any underlying of your choosing that opened up 300%+ from the previous week's close. Or name me one that appreciated 150%. There were many periods in history where the underlying of various futures traded at a realized vol higher than the vol Bitcoins currently trade. Your 10-year reference is completely irrelevant here and so is your reference to corn. I explicitly mentioned, "scaled by volatility". I thought that was clear. Apparently not.

     
    Last edited: Jun 27, 2019
    #32     Jun 27, 2019
  3. Fain

    Fain

    The high short margin requirement is likely from the CEO. Below was his comment letter 2 years ago before the futures came out. He even took out a Full Page Advertisement in the paper warning about Bitcoin.

    Re: Dangers of Clearing Bitcoin and Cryptocurrency Derivatives in Same Clearing Organization as Other Products

    Dear Chairman Giancarlo: I am the Chairman and founder of Interactive Brokers LLC, a futures commission merchant and broker-dealer with over $ 3.8 billion in regulatory net capital and over $1.2 billion in client margin funds (Interactive Brokers Group is publicly traded on Nasdaq with a market cap of over $22 billion). As a CME clearing member, we are deeply concerned with proposals that would allow Bitcoin and other cryptocurrency derivatives to be cleared in the same clearing organization as other products.

    This letter is to request that the Commission require that any clearing organization that wishes to clear any cryptocurrency or derivative of a cryptocurrency do so in a separate clearing system isolated from other products.

    There is no fundamental basis for valuation of Bitcoin and other cryptocurrencies, and they may assume any price from one day to the next. This has been illustrated quite clearly in 2017 as the price of Bitcoin has increased by nearly 1000%.

    Cryptocurrencies do not have a mature, regulated and tested underlying market. The products and their markets have existed for fewer than 10 years and bear little if any relationship to any economic circumstance or reality in the real world.

    Margining such a product in a reasonable manner is impossible. While the buyer (the long side) of a cryptocurrency futures contract or call option could be required to put up 100% of the value to ensure safety, determining the margin requirement for the seller (the short side) is impossible. Instituting daily price move limits on cryptocurrency derivatives does not solve the problem. In a runaway upward market for example (like the silver market in the 1980’s caused by the Hunt brothers), the futures price gets locked limit-up day after day with little or no trading and the short sellers are unable to cover, leading them (and potentially their clearing firms) to ruin. If the Chicago Mercantile Exchange or any other clearing organization clears a cryptocurrency together with other products, then a large cryptocurrency price move that destabilizes members that clear cryptocurrencies will destabilize the clearing organization itself and its ability to satisfy its fundamental obligation to pay the winners and collect from the losers on the other products in the same clearing pool.

    Accordingly, even clearing members who do not wish to clear cryptocurrencies because they judge the risk to be too great cannot isolate themselves and their customers from a potentially catastrophic loss from cryptocurrency risk at the clearing organization. Thus, it is no answer for the proponents of clearing these products to suggest that objecting clearing members can simply charge very large margins or not offer cryptocurrencies at all. In a central clearing organization, all members are at risk for the activities of any member (and of the clearing organization itself). Unless the risk of clearing cryptocurrency is isolated and segregated from other products, a catastrophe in the cryptocurrency market that destabilizes a clearing organization will destabilize the real economy, as critical equity index and commodity markets cleared in the same clearing organization become infected.

    The only way to protect clearing organizations and their members (and the financial system as a whole) from the unique risks inherent in clearing cryptocurrencies is to require that they be cleared in a separate clearing system, isolated from other products.

    We would be happy to discuss this with you or to provide any further information at your convenience.
    Sincerely,
    Thomas Petterffy
    Chairman
     
    #33     Jun 29, 2019
    Overnight likes this.
  4. Overnight

    Overnight


    RB?
     
    #34     Jun 29, 2019
  5. shatteredx

    shatteredx

    It would be nice if the CME contract was 1 Bitcoin instead of 5. Then we could at least daytrade a smaller notional amount without having to open an account at one of the shitty Bitcoin exchanges.

    Mainly, I'd like to be able to trade Bitcoin using the same interface that I use to trade other futures instruments.

    The CBOE XBT contract is available but its volume is pretty bad compared to CME BTC.
     
    #35     Jul 2, 2019
  6. Robert Morse

    Robert Morse Sponsor

    The CBOE XBT contract is NOT available. Shut down.
     
    #36     Jul 2, 2019
    shatteredx likes this.
  7. shatteredx

    shatteredx

    Oh wow you're right. Looks like it shut down two weeks ago.
     
    #37     Jul 2, 2019
  8. Petterfey is probably concerned the criminals who control the bitcoin market would manipulate it after taking positions with IB , and leave IB with a giant loss.

    Since 98% of the price movement in bitcon is controlled by the bitmafia, this is possible
     
    #38     Aug 1, 2019