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>If you place 1 BTC short with LedgerX LedgerX doesn’t support short-selling or margin trading. If you buy a put (the suggestion I made in my original comment)

by SilasX 4y ago

>If you place 1 BTC short with LedgerX LedgerX doesn’t support short-selling or margin trading. If you buy a put (the suggestion I made in my original comment), the counterparty sets aside the cash to honor it. (I think you’re confusing short-selling with a short position, but that doesn’t sound like mistake someone with your bio would make.) Are you done being confidently incorrect, or can I expect you to pollute more discussions with baseless claims you know nothing about? Bookmarking to warn future HNers what they’re dealing with. It’s fine to make mistakes. It’s not fine to be that wrong, with that level of confidence.

kasey_junk 4y ago
I don’t know anything about LedgerX or Crypto trading but do have a fair bit of fx experience so have a few questions about what you are describing. Doesn’t this just move the counterparty risk away from the exchange and onto another participant in the crypto ecosystem? One that is even more systematically long crypto and one with less regulatory protections around senior debt? Why would someone be a counterparty to this trade? It seems like they are trading a lot of downside risk to get cash equivalents upside. I’m sure I’m not understanding something about this setup but it certainly seems worse in all ways than an exchange actually enabling more traditional shorting.
- SilasX 4y ago
  Thanks! You're showing a lot more curiosity and honesty than JumpCrisscross. >Doesn’t this just move the counterparty risk away from the exchange and onto another participant in the crypto ecosystem? They have to set the money aside for the (cash-secured) put they're writing, out of their control, so no, you don't depend on any later solvency of that counterparty to honor the put. And, as above, customer access to these assets survived even the FTX bankruptcy, since they're not recognized as exchange assets in the first place. >Why would someone be a counterparty to this trade? It seems like they are trading a lot of downside risk to get cash equivalents upside. Same reason anyone else sells cash-secured puts. >I’m sure I’m not understanding something about this setup but it certainly seems worse in all ways than an exchange actually enabling more traditional shorting. Except that you, the person taking a short position (by buying puts) actually get a payout in the worst-case scenario, and have effectively no counterparty risk. That's at least one way that it's better. Also, I don't know what's "non-traditional" about buying puts as a means of establishing a short position. It seems that, like JumpCrisscross, you're being sloppy about the difference between short-selling (borrow an asset to sell) and a short position (any position that increases in value as the underlying decreases). Edit: Also, one thing that bothers me here is the lack of a coherent model behind the objections. On the one hand, you both want to claim something is impossible, but when I show it is, you want to insist that that way is "worse in every way". What?
  - JumpCrisscross 4y ago
    > have to set the money aside for the (cash-secured) put they're writing, out of their control, so no, you don't depend on any later solvency of that counterparty to honor the put There is no legal mechanism for them to insulate that cash from creditors.
    - SilasX 4y ago
      I guess I can't say I'm surprised by yet another confidently wrong claim on your part. This is one of the most high-profile cases of bankruptcy, where very determined creditors are hellbent on pulling out every penny from a very obvious fraud. And in this case, we already know that -- right in line with my claim -- depositors at one arm of the debtor did in fact have their deposits legally insulated from the (very extensive) creditor claims. And yet you are claiming, in this very instance, that that is not possible, even as it already happened. You couldn't be more wrong on the facts here. Perhaps you could have limited yourself to a lesser claim that, under specific conditions, that you enumerate from actual knowledge, depositors can't step ahead of other creditors. By being open and honest, and revealing the full basis of your belief, you could have said something at least true, even if you were (very honorably) wrong about the applicability to this particular case. You didn't take that route. You instead went with the tried-and-true "if I say it confidently enough, I have to be right". Sigh. In the other thread[1], you claimed I'm upset at you for your views on crypto. This is childish and false. I love to hear meaningful corrections to my worldmodel. Your comments aren't doing that. You're instead finding the most solid parts, and baselessly asserting things about them that are demonstrably false. I can't actually learn from that sophistry or meaningfully update my beliefs. No one can. [1] https://news.ycombinator.com/item?id=35559836 https://news.ycombinator.com/item?id=35559836
      - kasey_junk 4y ago
        You are really missing what he's saying. That this particular default was subject to a bankruptcy judge means a few things that would bring alarm bells to any professional risk manager. Its not a _good_ thing, its just not the worst thing. A few off the top of my head: It went to bankruptcy at all. With more forceful regulatory regimes (eg banking/brokerages) they skip bankruptcy proceedings for the most senior debt holders entirely. The regulator steps in and disburses the funds much faster. The judge had discretion, there was no legal insulation to LedgerX's creditors. They just had maintained enough arms distance to satisfy a bankruptcy judge to rule in one set of creditors favor over another's. His point is that unlike in other regulatory regimes, nothing in the law, says that deposits at a CFTC exchange are more senior to any other liability. And the precedence on clearing house default is not extensive. Most risk managers would view the fact that this judge ruled in their favor as the saving grace to a mistake on the risk management side. Also, you are on tilt here. Statements like "You couldn't be more wrong on the facts here." are pretty embarrassing when you are misconstruing things so dramatically.

by SilasX 4y ago

kasey_junk 4y ago

I don’t know anything about LedgerX or Crypto trading but do have a fair bit of fx experience so have a few questions about what you are describing. Doesn’t this just move the counterparty risk away from the exchange and onto another participant in the crypto ecosystem? One that is even more systematically long crypto and one with less regulatory protections around senior debt? Why would someone be a counterparty to this trade? It seems like they are trading a lot of downside risk to get cash equivalents upside. I’m sure I’m not understanding something about this setup but it certainly seems worse in all ways than an exchange actually enabling more traditional shorting.

SilasX 4y ago
Thanks! You're showing a lot more curiosity and honesty than JumpCrisscross. >Doesn’t this just move the counterparty risk away from the exchange and onto another participant in the crypto ecosystem? They have to set the money aside for the (cash-secured) put they're writing, out of their control, so no, you don't depend on any later solvency of that counterparty to honor the put. And, as above, customer access to these assets survived even the FTX bankruptcy, since they're not recognized as exchange assets in the first place. >Why would someone be a counterparty to this trade? It seems like they are trading a lot of downside risk to get cash equivalents upside. Same reason anyone else sells cash-secured puts. >I’m sure I’m not understanding something about this setup but it certainly seems worse in all ways than an exchange actually enabling more traditional shorting. Except that you, the person taking a short position (by buying puts) actually get a payout in the worst-case scenario, and have effectively no counterparty risk. That's at least one way that it's better. Also, I don't know what's "non-traditional" about buying puts as a means of establishing a short position. It seems that, like JumpCrisscross, you're being sloppy about the difference between short-selling (borrow an asset to sell) and a short position (any position that increases in value as the underlying decreases). Edit: Also, one thing that bothers me here is the lack of a coherent model behind the objections. On the one hand, you both want to claim something is impossible, but when I show it is, you want to insist that that way is "worse in every way". What?
- JumpCrisscross 4y ago
  > have to set the money aside for the (cash-secured) put they're writing, out of their control, so no, you don't depend on any later solvency of that counterparty to honor the put There is no legal mechanism for them to insulate that cash from creditors.
  - SilasX 4y ago
    I guess I can't say I'm surprised by yet another confidently wrong claim on your part. This is one of the most high-profile cases of bankruptcy, where very determined creditors are hellbent on pulling out every penny from a very obvious fraud. And in this case, we already know that -- right in line with my claim -- depositors at one arm of the debtor did in fact have their deposits legally insulated from the (very extensive) creditor claims. And yet you are claiming, in this very instance, that that is not possible, even as it already happened. You couldn't be more wrong on the facts here. Perhaps you could have limited yourself to a lesser claim that, under specific conditions, that you enumerate from actual knowledge, depositors can't step ahead of other creditors. By being open and honest, and revealing the full basis of your belief, you could have said something at least true, even if you were (very honorably) wrong about the applicability to this particular case. You didn't take that route. You instead went with the tried-and-true "if I say it confidently enough, I have to be right". Sigh. In the other thread[1], you claimed I'm upset at you for your views on crypto. This is childish and false. I love to hear meaningful corrections to my worldmodel. Your comments aren't doing that. You're instead finding the most solid parts, and baselessly asserting things about them that are demonstrably false. I can't actually learn from that sophistry or meaningfully update my beliefs. No one can. [1] https://news.ycombinator.com/item?id=35559836 https://news.ycombinator.com/item?id=35559836
    - kasey_junk 4y ago
      You are really missing what he's saying. That this particular default was subject to a bankruptcy judge means a few things that would bring alarm bells to any professional risk manager. Its not a _good_ thing, its just not the worst thing. A few off the top of my head: It went to bankruptcy at all. With more forceful regulatory regimes (eg banking/brokerages) they skip bankruptcy proceedings for the most senior debt holders entirely. The regulator steps in and disburses the funds much faster. The judge had discretion, there was no legal insulation to LedgerX's creditors. They just had maintained enough arms distance to satisfy a bankruptcy judge to rule in one set of creditors favor over another's. His point is that unlike in other regulatory regimes, nothing in the law, says that deposits at a CFTC exchange are more senior to any other liability. And the precedence on clearing house default is not extensive. Most risk managers would view the fact that this judge ruled in their favor as the saving grace to a mistake on the risk management side. Also, you are on tilt here. Statements like "You couldn't be more wrong on the facts here." are pretty embarrassing when you are misconstruing things so dramatically.