Huobi DM, the derivatives exchange of the Huobi Group launches a new settlement mechanism to protect the user from volatility
Huobi DM, the cryptocurrency derivatives exchange powered by Huobi Global, has announced a futures settlement mechanism called partial settlement to protect the user at the time of high market volatility.
Huobi made the announcement in a Press release published on Wednesday March 18. According to the announcement, the new feature will systematically minimize user exposure during times of severe market volatility.
Huobi said that in traditional futures trading, settlement is triggered in its entirety the moment a user's margin ratio is equal to or less than zero. Sudden changes in the markets could cause extensive loss of users due to a high leveraged position. But partial liquidation reduces a user's positions instead of liquidating them in full in a single event.
Amid the coronavirus and the uncertainty of the market in stocks and cryptocurrencies, almost all assets have experienced a strong price variation. Last week the bitcoin price It fell more than 50% in a single day causing exchanges like BitMEX and Gemini to go offline. During the accident, BitMEX reportedly saw settlements of over $ 500 million in an hour. Huobi also saw settlements of $ 27.45 million during the incident.
To protect against these settlement risks, Huobi DM has launched partial settlement. Huobi's announcement says:
“With the new mechanism, the system will automatically begin to liquidate a user's positions in stages, at predetermined margin rates determined by the exposure calculated by the user, until the margin index reaches more than zero. The settlement process also includes a circuit breaker function that stops the settlement when large or unusual deviations between the settlement price and the market price are detected. ”
According to the announcement, all assets and leverages in Huobi DM are backed by a partial liquidation. The function is available to the user without fees. The exchange also lowered its overall tuning factor and updated its system firmware in preparation for the next bitcoin halving that will increase transaction throughput by more than 50% and double the system response speed over to the previous version.
Huobi DM has experienced significant growth since its launch. According to recent statistics provided by CoinGecko, Huobi DM is the largest derivatives exchange by daily trading volume. Last month, Huobi DM's average daily trading volume was $ 5.7 billion, an increase of 227% since the end of 2019.
To keep the number outstanding, it is necessary for a trading platform to have some safeguards and risk management tools on its platform to protect itself against the high market swings that Huobi DM is doing.
Ciara Sun, vice president of global business at Huobi Group, commented:
“Market volatility creates new arbitrage opportunities for users, but it can also lead to unnecessarily high-risk circumstances if the appropriate measures are not taken to protect them. Our goal is to safeguard the assets of our users while providing a solid business experience, which is why we are using this partial settlement mechanism to minimize the disadvantages without diluting the possible advantages ”
