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Goldman Sachs Plans to Clear Bitcoin Futures When They Go Live

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Re: Goldman Sachs Plans to Clear Bitcoin Futures When They Go Live

#71

Post by vostok »

riazrizvi wrote: post #21
bogomipz wrote: post #10

>"The decision to clear client trades will be made on a case-by-case basis, the person said." Could someone say what "clearing the trades" mean here?

It's where Goldman would net off trades between their own clients, effectively acting as an exchange for their clients using the prices on the official exchange. They say in the article they won't act as market-makers or hold their own positions. That means they won't perform their usual capacity for clients, where they act as middleman between the exchange and their own clients. ie they won't make a price for their…

> It's where Goldman would net off trades between their own clients

This is internalization, which is different from clearing.

Re: Goldman Sachs Plans to Clear Bitcoin Futures When They Go Live

#72

Post by nostrademons »

travmatt wrote: post #67
CoryG89 wrote: post #66

Earlier quoted context omitted.

I assume this is getting downvoted because it won't actually work. Can someone explain why? Can you not use a stop loss like this in futures trading when you short something? May be a silly question, but I know little about this stuff.

I’m no investor, but one reason I could think as to why it wouldn’t work is once a crash starts, demand would suddenly dry up at the prices you specified and you’d suddenly find yourself with a bunch of orders that can’t be filled.

Yeah. Or worse, you have orders that are filled, but because they are market orders and the market has disappeared, they aren't filled at anywhere close to the price you expected.

At my first job I had a project that involved looking at the actual order book for various stocks on the NASDAQ. There's always some asshole who puts in a limit buy for $0.01 on the hopes that if liquidity dries up, they'll be the best bid and get the stock for literal pennies on the dollar (I've been that asshole, though I've never actually had an order filled at that price). Normally all these orders are completely irrelevant because they're nowhere close to being the best bid, so other buyers get the stock and they just sit there on the order book.

In a flash crash scenario where everybody runs to the exits at once, it's possible for liquidity to completely dry up. The market gets hammered by so many sell orders that they burn through all the people willing to buy at reasonable prices. Then the exchanges dutifully match you up with whoever's left in the order book...which is usually the jokers who are like "Well, I'll put in a limit order for $0.01, leave it there, and see if it ever fills." Because your stop is actually a market order, you take whatever price the market gives you, which is...$0.01. You've just sold your $18K bitcoin for one cent.

This actually happened with the flash crash of 2010, but because market manipulation was proven, NASDAQ halted trading and invalidated the trades that occurred at those prices. There are no such failsafes or means of recovery with Bitcoin.

https://en.wikipedia.org/wiki/2010_Flash_Crash

Stop limits have the problem you mentioned - they just won't get filled in a flash crash, leaving you with Bitcoin that you can't get rid of.

Re: Goldman Sachs Plans to Clear Bitcoin Futures When They Go Live

#73

Post by kough »

osrec wrote: post #52
workthrowaway27 wrote: post #22

Earlier quoted context omitted.

It's not really hypocrisy. There's money to made by clearing futures and some of the banks want that money. What's being traded doesn't really matter.

Maybe, but then the things he said about his potential future clients are just downright hurtful: https://www.cnbc.com/2017/10/13/jamie-dimon-says-people-who-...

> "The only value of bitcoin is what the other guy'll pay for it," Dimon said. "Honestly I think there's a good chance of the buyers out there are out there jazzing it up every day so that maybe you'll buy it too, and take them out."

Is there any reason to consider this statement inaccurate?

Re: Goldman Sachs Plans to Clear Bitcoin Futures When They Go Live

#74

Post by adrianratnapala »

Has anyone discussed the future of forks with respect to futures? Or indeed to any cryptocurrency denominated debts.

The easy case is: Alice owes Bob 1.0 BTC in year 2020. Between then and now, BTC forks into BTC and BTZ -- and so now Alice Owes bob 1.0 "new" BTC and zero BTZ. On net, does this mean that whatever fork retains the legal position of BTC is going to be in more demand than hypthetical BTZs?

Given that, will it create a incentive for forkers to fight for legal recognition such that debts can be / have to be payed in their own currency. And if they do this with some success, what happens when instead of having a clear BTC/BTZ split, you have a BTC_forkA and BTC_forkB for paying debts in.

Re: Goldman Sachs Plans to Clear Bitcoin Futures When They Go Live

#75

Post by dragonwriter »

CoryG89 wrote: post #66
lallysingh wrote: post #53

Earlier quoted context omitted.

Just use a stop order: https://support.gdax.com/customer/portal/articles/2426596 There will be some slippage, but it'll be relatively bound.

I assume this is getting downvoted because it won't actually work. Can someone explain why? Can you not use a stop loss like this in futures trading when you short something? May be a silly question, but I know little about this stuff.

A stop loss will (assuming anyone is willing to take the other side at any price, since it's a market order) get filled once triggered, but depending on market dynamics with potentially unlimited slippage. Slippage tends to be limited in markets with high liquidity, but as I understand Bitcoin on any existing exchange hasn't consistently shown that behavior.

A stop limit order doesn't have unlimited slippage, but may not get filled at all; there is no foolproof stop order.

Re: Goldman Sachs Plans to Clear Bitcoin Futures When They Go Live

#76

Post by osrec »

kough wrote: post #73
osrec wrote: post #52

Earlier quoted context omitted.

Maybe, but then the things he said about his potential future clients are just downright hurtful: https://www.cnbc.com/2017/10/13/jamie-dimon-says-people-who-...

> "The only value of bitcoin is what the other guy'll pay for it," Dimon said. "Honestly I think there's a good chance of the buyers out there are out there jazzing it up every day so that maybe you'll buy it too, and take them out." Is there any reason to consider this statement inaccurate?

It's accurate, but it's also accurate for almost every fund/structured security that many of JP's desks are peddling.

Re: Goldman Sachs Plans to Clear Bitcoin Futures When They Go Live

#77

Post by dragonwriter »

olalonde wrote: post #49
bogomipz wrote: post #10

>"The decision to clear client trades will be made on a case-by-case basis, the person said." Could someone say what "clearing the trades" mean here?

Why don't their clients trade directly on the exchange? What value does GS provide here?

> Why don't their clients trade directly on the exchange?

Because to do that with funds in a GS account that you use for trading other things, you have to take the money out, which adds friction?

Re: Goldman Sachs Plans to Clear Bitcoin Futures When They Go Live

#78

Post by withdavidli »

nostrademons wrote: post #72
travmatt wrote: post #67

Earlier quoted context omitted.

I’m no investor, but one reason I could think as to why it wouldn’t work is once a crash starts, demand would suddenly dry up at the prices you specified and you’d suddenly find yourself with a bunch of orders that can’t be filled.

Yeah. Or worse, you have orders that are filled, but because they are market orders and the market has disappeared, they aren't filled at anywhere close to the price you expected. At my first job I had a project that involved looking at the actual order book for various stocks on the NASDAQ. There's always some asshole who puts in a limit buy for $0.01 on the hopes that if liquidity dries up, they'll be the best bid…

This is exactly what happened with ETH few months back on GDAX. 300 to 200, crashes the site in seconds, triggered pretty much all stop losses and margin calls. When down to a penny.

Re: Goldman Sachs Plans to Clear Bitcoin Futures When They Go Live

#79

Post by cvsh »

nostrademons wrote: post #72
travmatt wrote: post #67

Earlier quoted context omitted.

I’m no investor, but one reason I could think as to why it wouldn’t work is once a crash starts, demand would suddenly dry up at the prices you specified and you’d suddenly find yourself with a bunch of orders that can’t be filled.

Yeah. Or worse, you have orders that are filled, but because they are market orders and the market has disappeared, they aren't filled at anywhere close to the price you expected. At my first job I had a project that involved looking at the actual order book for various stocks on the NASDAQ. There's always some asshole who puts in a limit buy for $0.01 on the hopes that if liquidity dries up, they'll be the best bid…

>There's always some asshole who puts in a limit buy for $0.01 on the hopes that if liquidity dries up, they'll be the best bid and get the stock for literal pennies on the dollar ... Because your stop is actually a market order, you take whatever price the market gives you, which is...$0.01.

Why doesn't everyone do this constantly if it's a possibility? Low chance of such a windfall, but what's the downside?

Re: Goldman Sachs Plans to Clear Bitcoin Futures When They Go Live

#80

Post by dragonwriter »

firethief wrote: post #59
Florin_Andrei wrote: post #47

Earlier quoted context omitted.

Why can't they run an internal blockchain?

Why can't a fish wear swimfins? A blockchain is a solution to the problem of establishing consensus without relying on an authority. If your systems relies on trust in an authority, adding a blockchain is good for one thing: marketing.

You just provided a reason to use a block chain, not a reason that it is implausible.

Whether or not it is something you think of as a good reason, “marketing” is a real reason things get done in businesses.

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