AMA Recap: Huobi Futures Partial Liquidation
On March 9,2020, Huobi Futures CEO was invited as the guest speaker of AMA hosted by Huobi Official telegram group to share the new feature: partial liquidation with the community.
Guest Speaker Introduction
Jason Lan, master of automation engineering in Tsinghua University & master of financial engineering in HKUST, is the Vice President of Huobi Group and CEO of Huobi Futures. Before joining Huobi, he worked as technology analyst and VP in Goldman Sachs (Asia). With over 8 years’ system design and development expertise in security trading and risk control in GS, Jason Lan has been deeply involved in stock and derivative trading system building. Since the year of Huobi Futures’ establishment in 2018, he has been working to lead Huobi Futures to the top crypto derivative trading platform.
Q1: When will partial liquidation be launched?
A: Partial liquidation has been available on Huobi Futures since 18:00 on March 9th, 2020 (GMT+8).
Q2: What is liquidation price?
A: In contract trading, liquidation price is the estimated market price when the margin ratio is equal to or less than 0. When market price reached the liquidation price, liquidation will be triggered.
Q3: Does partial liquidation need a fee?
A: There is no charge for partial liquidation on Huobi Futures, while the fee is high on other competing platforms; therefore, it is an advantage of our platform.
Q4: What are coins /leverages that partial liquidation supports?
A: All coins and leverages on Huobi Futures are supported by partial liquidation.
Q5: How to locate transactions in Partial Liquidation? / Do you need conditions for partial liquidation?
A: Partial liquidation is for everyone. No additional operation is required from users.
Partial liquidation is the mechanism used when liquidation is triggered. Instead of being liquidated at a time, positions of Huobi Futures users will be reduced gradually until a grade that meets the margin ratio requirement. Guarantee users’ equity safety thus giving them better trading experience is our long-term pursuing goal.
Q6: What’s the main difference between Liquidation & Partial Liquidation?
A: I will show you an example to show the difference between these two in brief: Assume a user’s position is 1, and when liquidation is triggered:
Under liquidation mechanism: the user’s position will change from 1 → 0
Under partial liquidation mechanism: the user’s position may change from 1 → 0.5 /0.1 / 0.01/ 0
Q7: I really like stop loss, please tell me why Partial Liquidation should be used?
A: Both are good methods to reduce risk.
The difference is that stop loss needs to be set by contract users according to their trading preference, but partial liquidation is how the system operates when liquidation is triggered. No setting is required from users.
Q8: Can you explain How Partial Liquidation works?
A: Huobi Futures used full liquidation mechanism before but now we adopted partial liquidation with the aim of providing better service by lowering user’s risk.
Under partial liquidation mechanism, when liquidation is triggered, system will first reduce user’s positions partially and calculate its corresponding margin ratio. Partial liquidation continues if the corresponding margin ratio fails to meet the requirement; otherwise, it terminates automatically.
Q9: With partial liquidation, will user’s assets never be liquidated fully or it still can?
A: Full liquidation may happen, but it occurs only when the user’s margin ratio fails to be greater than 0 at the minimum requirement.
Q10: How can Partial Liquidation prevent a bad situation from getting worse?
A: Users with large positions and high leverages bear high risk. When market fluctuates unexpectedly, they are likely to be influenced and lose all of their positions. Partial liquidation is a mechanism that Huobi Futures adopted to help our users reduce potential losses under such circumstance.
Q11: What are the advantages of partial liquidation on Huobi Futures when compared with that of other platform?
A:1. There is no charge for partial liquidation on Huobi Futures, while the fee is high on other competing platforms; therefore, it is an advantage of our platform.
2. In this upgrade, we lowered overall adjustment factors. Comparing across the industry, Huobi Futures’ adjustment factors are the lowest.Why is this a good news for users?
Margin Ratio = ( Equity Balance / Used Margin ) * 100% — Adjustment Factor
We can see the smaller the adjustment factor, the larger the margin ratio, which means liquidation is less likely to be triggered.
Q12: Trust is very important in business. What makes users feel safe when using Huobi Futures?
A: I will explain from four aspects and give each one an example:
1. Well designed-Product: We adopted partial liquidation to lower user’s risk.
2. User-friendly policy: We released real-time settlement for BTC, ETH and LTC delivery contracts to help users make use of their funds more efficiently.
3. Eye-catching performance: Liquidity matters most to an exchange. We has the leading daily turnover and market depth in terms of delivery contract
4. Well-performed system with high concurrency and low latency: In system upgrade to V 3.3.0, throughput is increased by at least 50% and system response speed became at least a time faster than before.
Too many to mention, join dm.huobi.vc now to explore by yourself.
Q13: Currently on Huobi DM, I have only seen some trading contracts from BTC / ETH / EOS / LTC / XRP / BCH / TRX / BSV / ETC. I think that it does not have many contracts to choose, whether in the future, there will be more contracts on Huobi DM or not?
A: Yes. We are planning to list more tokens such as HT. Besides, other derivatives such as perpetual swaps and options are under development as well. Stay tuned for forthcoming announcements.
Q14: The existing levers of Huobi DM: 1x, 5x, 10x, 20x, will there be more development leverage for Huobi DM for later?
A: We are going to launch Huobi perpetual swap in late March with various leverages available, up to 125x. More details to be announced. Please stay tuned.
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