5 ms·

I feel like the ruling just says "futures cannot be less risky than assets" which is a weird call for a judicial review panel to make. Especially since it wasn'

I feel like the ruling just says "futures cannot be less risky than assets" which is a weird call for a judicial review panel to make. Especially since it wasn't financial risk but fraud tracing risk. I don't believe that is a call they can't make just that the ruling as I read it doesn't really justify it. Simply saying that Greyscale claims it and that was it. They do say "both are impacted by changes" but that feels like an overly simplistic line to draw to attack an explicit consistent decision by the SEC.

Nevermark 3y ago
Wouldn't the call be saying direct holdings are less risky than futures? Futures have already been approved. In general futures are much more risky than long/short holdings because they are effectively highly leveraged. Which would also be true if there is market manipulation. Any bumps in the original assets price get magnified in futures pricing. So it is odd that the SEC approved futures but not the direct asset itself. Unless anyone here knows of a good argument why the direct asset could carry more risk, manipulation or otherwise, than its futures?
- Guvante 3y ago
  Futures manipulation is hard when the future is controlled. Futures aren't as impacted by price as you imply under the effects of market manipulation. While you might have a change due to expected resiliency generally futures don't shift like assets do under temporary manipulation. If it only lasts a day or two futures don't have time to shift.
  - Nevermark 3y ago
    I see, so if I get this right, futures are valued based on the expected asset value at the future’s expiry date - which tends to be more sensitive to trends (which are harder to manipulate), and less sensitive to momentary price fluctuations (which are much easier to manipulate)? Except as the expiry date approaches. At that time fluctuations in assets and and derivatives must approach lock step, with the derivative having a magnified response. So there should be at least that critical time (approaching expiration) when market manipulation impacts derivatives more proportionally than base asset prices.
    - Guvante 3y ago
      Volume matters and if the majority are outside that window it shouldn't impact the majority. Again though the bar for Judicial overriding a consistent ruling should be very high. And they consistently made this choice.

Nevermark 3y ago

Wouldn't the call be saying direct holdings are less risky than futures? Futures have already been approved. In general futures are much more risky than long/short holdings because they are effectively highly leveraged. Which would also be true if there is market manipulation. Any bumps in the original assets price get magnified in futures pricing. So it is odd that the SEC approved futures but not the direct asset itself. Unless anyone here knows of a good argument why the direct asset could carry more risk, manipulation or otherwise, than its futures?

Guvante 3y ago
Futures manipulation is hard when the future is controlled. Futures aren't as impacted by price as you imply under the effects of market manipulation. While you might have a change due to expected resiliency generally futures don't shift like assets do under temporary manipulation. If it only lasts a day or two futures don't have time to shift.
- Nevermark 3y ago
  I see, so if I get this right, futures are valued based on the expected asset value at the future’s expiry date - which tends to be more sensitive to trends (which are harder to manipulate), and less sensitive to momentary price fluctuations (which are much easier to manipulate)? Except as the expiry date approaches. At that time fluctuations in assets and and derivatives must approach lock step, with the derivative having a magnified response. So there should be at least that critical time (approaching expiration) when market manipulation impacts derivatives more proportionally than base asset prices.
  - Guvante 3y ago
    Volume matters and if the majority are outside that window it shouldn't impact the majority. Again though the bar for Judicial overriding a consistent ruling should be very high. And they consistently made this choice.