What order types are supported?

The orders you may submit are limit orders. A limit order has the following characteristics:

  • It's either a BUY or SELL order.
  • It has two parameters: quantity - the amount you want to buy or sell and price - the order will be executed at this price or better.
  • It does not expire, unless the instrument is no longer active.
  • It may be cancelled.
  • It may be modified (via API only).

During continuous trading, the orders are matched with price then time priority. However, the orders are matched differently during the auction.

You may also sometimes see a market order in the order book. It does not have a price limit - it will be executed at any price available on the other side of the order book. Market orders are placed automatically by the system to liquidate a position.

Are there any fees?

Yes. Quedex charges a small trading fee for each trade that is removing liquidity (which means that Quedex applies the maker-taker fee model). There is also a settlement fee, applied when the contract expires.

However, threre are no fees for depositing bitcoins, no withdrawal fees (except Bitcoin network fees) and no fees for the settlement of options expiring out-of-the-money.

Please visit our Fees page to find more details on our fee structure.

How does the session schedule look like?

Every day, the exchange transitions between the following trading states:

  1. Closing Auction 11:55 - 12:00 UTC
  2. No trading 12:00 - 13:00 UTC
  3. Opening Auction 13:00 - 13:05 UTC
  4. Continuous Trading 13:05 - 11:55 UTC on the next day

Deposits & Withdrawals

How can I deposit?

Only Bitcoin deposits are accepted.

You may deposit BTC to an address assigned to your account. Deposits go straight to our Cold Wallet, but are booked immediately (1 min. max.) after reaching 12 confirmations (temporary increase due to Bitcoin blockchain reorganizations threat caused by segwit deployment) and are available for trading.

How can I withdraw?

You may withdraw to the account of your choice. The amount has to be at least 0.01 BTC. Submitted withdrawal requests await manual verification and signing in our Cold Wallet. The funds requested for withdrawal are locked and not available for trading.

Withdrawals are processed at least once a day, and are subject to both automated and manual checks.

Risk Management

When and how are positions liquidated?

The positions are liquidated if your balance (after deducing pending withdrawals, order fees and buy option order premiums) of that account falls below minimum maintenance margin requirement (currently 4% of positions' value and 5% of pending orders' value). If your balance falls below initial margin level (that is, your free balance falls below zero), you will get a margin call, i.e. you will be notified to deposit more funds or close your positions.

During liquidations, all pending orders are cancelled, as well as withdrawals (if they are flagged to be cancelable). If that doesn't bring free balance above zero, all open positions are closed with market orders. If these orders would cause significant price jumps, auction is triggered.

Do I have any guarantees about securing my PnL?

Yes. During continuous trading, all profits are added directly to the trader's balance and are immediately available for withdrawal and trading, thus allowing for greater leverage. This also means that all profits from continuous trading are guaranteed (are not subject to socialisation of losses).

When do socialised losses come into play?

Systemic losses can occur if the trader's orders are liquidated at a price resulting in a negative balance (after including profits or losses accrued during auction), which can only occur at the end of the auction and can affect only the profits gained during auction. Our innovative multi-tier risk management system ensures that socialization of those systemic losses is rare and not severe:

  1. First tier - swift liquidation via market orders
  2. Second tier - balancing auction, which garners volume necessary to handle large liquidations
  3. Third tier - insurance fund to cover any resulting systemic losses that could arise during auction
  4. Fourth and final tier - socialization of remaining losses, which comes into play only when former three tiers are passed.

What is auction?

The auction is an additional market model (next to continuous trading, popular on other platforms), which focuses on maximizing traded volume and on price stability. This is a time-tested solution (applied by e.g. London Stock Exchange, Eurex, Tokyo Securities Exchange, Osaka Derivatives Exchange, etc.) that allows to obtain robust settlement price and to prevent cascading margin calls or market manipulations.

During the Auction, orders are accepted, put in the order book, but not immediately matched - instead, all matching occurs at the end of the auction.

The algorithm works as follows:

  1. For each price, the potentially traded volume is calculated. Trade volume is the lesser value of the two: cumulative buy volume and cumulative sell volume, for a given price.
  2. The price maximizing traded volume is selected as the Theoretical Auction Price.
  3. If the price is not unique, a price with the minimum absolute difference between cumulative buy volume and cumulative sell volume is selected. If the price is still not unique, a price closest to the last price is selected.

After 5 minutes, the auction ends and the last Theoretical Auction Price is set as the Auction Price, and orders are matched at that price. All orders with a price better than the Auction Price will be matched in full, orders exactly at the Auction Price will be matched according to time priority.

When (and why) is the balancing auction triggered?

Auction is triggered when a single order (either liquidation market order or regular limit order) thrown on the market would cause a price move of more than 4%[1]. This means that volatile market moves that aren't caused by liquidation and smooth liquidations will almost never trigger an auction.

The auction prevents uncontrolled (i.e. not caused by the underlying market) price moves that may result from liquidations, market manipulation, &. Furthermore, the auction serves as a circuit breaker for cascading liquidations - it gives market time to garner sufficient liquidity to absorb the shock.

[1] In case of options, this is 4% calculated using the price of futures contract with the corresponding maturity, not 4% of option premium.

What if there is a sudden market move of $30 and the auction gets triggered? Will I be able to protect myself from further losses?

First, if the price would drop smoothly (no rapid jumps or cascading margin calls), then no auction would happen and all positions could be closed easily during continuous trading. The parameters of the auction triggering are tuned in such a way not to impede normal market conditions.

Second, the exchange uses liquidations - and auction if these are very rapid - to limit the systemic losses, just as individual traders may want to jump out of their losing positions.

For the exchange, it is better to trigger the auction in that case, in comparison to allowing the price to crash (or squeeze). It is preferrable to cut losses swiftly, in particular when auction enables enough volume to pick the liquidation orders, than to keep the positions open when they cannot be liquidated without systemic loss.

The situation (and interests) of the exchange and individual traders is the same. The auction is beneficial to the exchange itself as a form of stop loss, and the more so for a single trader who hopes to get out at the best price! In addition, it is obviously in the interest of traders not to have any profit clawbacks or forced liquidations.

Of course, it takes more time to get out of the position when auction occurs in comparison to continuous trading. However, any alternative socialized losses system does not allow to get out of the position until final settlement (or rebalance)! If the exchange keeps the positions opened when these cannot be liquidated at positive balance, you have to wait much, much longer - until the contract has settled or has been rebalanced. Until then, your profits can always be eaten by a clawback.

Will the auction help me get out of a multi-leg position consisting of multiple futures and options?

Yes! It is much easier to close multi-leg futures and options positions when market is being balanced.

  • Single options contracts are closely related to one another, and options as a whole are connected with futures markets.
  • Even if the liquidation or stop loss was almost immediate, each leg (each single contract) would put pressure to other connected instruments, and the final price for the whole position would be much worse.
  • The balancing auction allows to disperse that pressure evenly on each leg simultaneously, and to gather necessary supply from the opposite side of the order book.

As a side note, commonly employed liquidation systems that use limit orders (instead of market orders and auction) are very ill-suited to managing risk of complex options positions.

  • These alternative systems can easily lead to situation where only a part of a multi-leg option position gets liquidated, the other getting stuck in the orderbook and waiting for socialization of losses. This will likely lead to an increase of the overall position exposure to the market, as multi-leg options positions may carry less risk than each leg separately. In consequence, systemic losses will be greater in comparison to no liquidation at all!
  • They could be easily manipulated. An attacker can manipulate the price of a less liquid leg, forcing liquidation of the whole position. With auction in place, the attacker will be unable to sufficiently manipulate the illiquid option or will not be able to benefit from the manipulation, as others could pick up liquidations.

Our auction system is immune to these threats.

How does Quedex auction compare to other risk systems?

Have a look at the following table:

Auction + market orders Socialized losses with market orders Deleveraging / closing positions Socialized losses with limit orders Socialized losses with limit orders and Fair price marking
Which exchanges use it? Quedex None (Bitfinex liquidates with market orders but without socialized losses) CryptoFacilities, BitVC, BTCC Pro OKEX Bitmex
Does it come with an insurance fund? Yes It is compatible with an insurance fund No Yes Yes
Does it offer high chances to diminish system losses? Yes, balancing auction obtains better stop loss price and liquidation price No, liquidations are performed extremely aggressively at the expense of price No, any losses (and profits) are capped by traders' holdings No, although there is a chance that price will return to the limit price, at the cost of increased risk of very high (50%+) profit haircut, even from people with low leverage, and from profits gained before the event. No, although there is a chance that price will return to the limit price, at the cost of increased risk of very high (50%+) profit haircut, even from people with low leverage, and from profits gained before the event.
Does it make market manipulation more unlikely? Yes - any significant manipulation on thin order books will be countered by the auction No, to the contrary, it provides incentives for manipulating and liquidation hunting No, to the contrary, it provides incentives for manipulating and liquidation hunting No, to the contrary, it provides incentives for manipulating and liquidation hunting Yes, it uses external price feeds to properly value the margin
Is it suitable for options trading? Yes, in particular it allows to gently liquidate multi-leg positions Yes Yes No, incomplete limit order liquidations can increase systemic losses No, it is not possible to calculate reasonable real-time fair price marking for volatility, which is essential to option valuation
Can prices be distorted by systemic losses risk? No Yes, when it is clear that some clawback will occur, the prices reflect that Yes, but only in the face of high risk of asymmetric (directional) moves Yes, when it is clear that some clawback will occur, the prices reflect that Yes, when it is clear that some clawback will occur, the prices reflect that
Is it possible to immediately use or withdraw profits from closed positions? Yes, the profits are available even earlier - when the position is still open No, you have to wait until settlement / rebalance (which may however happen anytime) Yes No, you have to wait until weekly / quarterly settlement No, you have to wait until daily / weekly settlement or rebalance
Is it possible to immediately use or withdraw profits from open positions? Yes! This way you can greatly increase your effective leverage or keep your profits No No No No