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Block Ukx Forge Laboratories	Posted - 2011.04.16 01:49:00 - [31] Originally by: Molic Blackbird In the first post, you said: Originally by: Block Ukx Short sellers must post a 5% initial margin and maintain an adequate ISK balance in their account to cover margin calls due to mineral price movement Then later on you stated: Originally by: Block Ukx we recommend the short seller to keep enough ISK in his account to cover margin calls. Which one is it? Is it recommended or required? I understand that can be confusing. When you place a short, your initial margin is 5% of gross sales. The ISK is withdrawn from your ISK available balance and deposited in your margin account. In the test server you will find a new entry under my balance showing your margin balance. A day later I update the bid price. The server then updates the margin requirements using the formula in the original post. If your margin balance is below your required margin, then ISK is withdrawn from your ISK available and deposited in your margin account. So if prices start to move against your position, your margin requirements will increase and more ISK will be transfer from ISK available to the margin account. If you do not have sufficient funds in your ISK available, you will end up with a negative ISK available balance. At this point you will get a warning to deposit additional ISK, otherwise IÆll close your open positions till your margin requirements are met. Therefore, if you do not want the Exchange to close your positions you should keep enough ISK in your ISK available balance to meet margin requirements. Originally by: Molic Blackbird Also, does that ISK need to be liquid or can it be in various investments within the BSAC site? ISK has to be liquid. However, I am working on the code to gauge the account NAV and give you a break and not close your position if you have sufficient NAV. Originally by: Molic Blackbird It was stated there would be volume limits. Do you have a rough idea what those limits will be? Maximum volume will be roughly 10% Jita daily volume. Originally by: Molic Blackbird Are there min/max lengths of time before the short sell can be covered? Right now there is no limit on min/max lengths. However, short sells are subject to call by BSAMR and if margin requirements are not meet. Perhaps, we need to include a min length ( 2-3 months) before BSAMR can call a short. Originally by: Molic Blackbird There have been examples how things work if the mineral price goes down, could you give an example of what happens when the mineral price goes up? If mineral prices go up, then your margin requirements go up. Obviously, if you close your position you will lose money. BSAC Stock Exchange - EVE's only real-time stock exchange
Cista2 Hydra Investment Fund	Posted - 2011.04.16 05:44:00 - [32] Thanks Block and others for clarifying that you only deposit the margin. My next question is: then the service will be more of a spread betting bureau than a short selling bureau. Since, surely in a market where Trit is falling, Block will not go and ACTUALLY buy Trit in large amounts. He will just sit and see how far the price goes down compared to your initial wager, and hope his margin covers it. Right? Not that I mind, I think it's a great idea. ----------------------- "Signatures" trade chatroom / Universal Railways
Vaerah Vahrokha Minmatar Vahrokh Consulting	Posted - 2011.04.16 07:10:00 - [33] Originally by: Cista2 Thanks Block and others for clarifying that you only deposit the margin. My next question is: then the service will be more of a spread betting bureau than a short selling bureau. Since, surely in a market where Trit is falling, Block will not go and ACTUALLY buy Trit in large amounts. He will just sit and see how far the price goes down compared to your initial wager, and hope his margin covers it. Right? Not that I mind, I think it's a great idea. I haven't got the time to check, but it looks like an exchange traded fund aka ETF, and therefore it's just cash settled even if it possibly got an underlying based on commodities. Auditing \| Research \| 3rd Party \| Collateral Holding \| EvE RL Charity
Skyler Snow	Posted - 2011.04.16 07:31:00 - [34] Originally by: Cista2 My next question is: then the service will be more of a spread betting bureau than a short selling bureau. Since, surely in a market where Trit is falling, Block will not go and ACTUALLY buy Trit in large amounts. He will just sit and see how far the price goes down compared to your initial wager, and hope his margin covers it. Right? I think you are wrong. Block manages BSAMR. The 'R' there means "reserve". He HAS large amounts of trit at ANY time. And when I say 'large' I really mean LARGE. He wrote that the limit will be around 10% of Jita daily. This means he plan to have that much trit as a minimum at any time. When you open a short sell position, he actually sells. When you close, he actually buys back. Or at least this is what he says he'll be doing. If so it's effectively a short selling bureau (acting as both the lender and the broker). My questions for him are: 1) How will you manage, in a down trending market, the price delta from the moment someone asks to open a short position (based on the latest value you published) and the actual (possibly lower) market value when you get online to act out the sale? 2) As both the open and close values are defined by your own data, how is a short seller guaranteed? Especially from you posting a closing value higher than what he considers the actual bottom. And even if he decides to close at your price, how are you going to handle the specular problem of question 1 (if the short seller decides to close during an upward trend).
Skyler Snow	Posted - 2011.04.16 07:51:00 - [35] Originally by: Vaerah Vahrokha I haven't got the time to check, but it looks like an exchange traded fund aka ETF, and therefore it's just cash settled even if it possibly got an underlying based on commodities. As he manages both the mineral reserve operation and the mineral indexes operation, there surely is more than enough underlying commodities. Note that whether his "selling when a short position opens and buying when it closes" is something that happens on the market or not is irrelevant to the operation. As he stated, if a position closes and another opens, he can compensate and needs not post both a buy and a sell on the market. Even if a position change (either open or close) is not balanced by another position change, he can still decide to compensate "internally" with the normal 'movements' of the reserve or even of the indexes. In other words: the "sale" from a short position opening may actually have the reserve or the index as a buyer. This, I think, is exactly what SencneS is worrying about.
Vaerah Vahrokha Minmatar Vahrokh Consulting	Posted - 2011.04.16 11:08:00 - [36] Originally by: Skyler Snow In other words: the "sale" from a short position opening may actually have the reserve or the index as a buyer. This, I think, is exactly what SencneS is worrying about. What's to be worried about? BSAMR is going to be a market maker, market makers ARE the counterpart for their customer trading and they are perfectly able to manipulate, change, requote, play with spreads and 1000 other ways to screw up their users. Therefore, like always, you either trust the player or you don't, this seems to be the basics and the limit of EvE. Auditing \| Research \| 3rd Party \| Collateral Holding \| EvE RL Charity
Block Ukx Forge Laboratories	Posted - 2011.04.16 13:59:00 - [37] Originally by: Cista2 My next question is: then the service will be more of a spread betting bureau than a short selling bureau. Since, surely in a market where Trit is falling, Block will not go and ACTUALLY buy Trit in large amounts. He will just sit and see how far the price goes down compared to your initial wager, and hope his margin covers it. Right? No, when you open a position I will sell the short volume in the market. BSAMR continuously sells and purchase minerals. BSAC Stock Exchange - EVE's only real-time stock exchange
YouGotRipped Ewigkeit	Posted - 2011.04.16 14:33:00 - [38] Not you again. Black Sun Empire
RAW23	Posted - 2011.04.16 14:48:00 - [39] Short selling is completely new to me so forgive me if the following question displays a certain degree of ignorance. Does BSAC make a profit from running this or is it a community service? If you do profit, where in the transaction do you make your money?
Katie Tanaka	Posted - 2011.04.16 15:12:00 - [40] Aren't you guaranteed to bleed money from failed margin calls whenever daily volatility is above the 1% bid-offer spread on the index?
Block Ukx Forge Laboratories	Posted - 2011.04.16 15:24:00 - [41] Originally by: Katie Tanaka Aren't you guaranteed to bleed money from failed margin calls whenever daily volatility is above the 1% bid-offer spread on the index? IÆm not sure I follow your question. The initial margin is 5%. If short seller cannot meet the required margin after a price change then he risks losing his position. The 5% margin should suffice to cover any loss. A daily price change above 5% could potentially end up as a loss from the Exchange. My goal is to use the 0.5 % broker fee to cover potential losses. BSAC Stock Exchange - EVE's only real-time stock exchange
RAW23	Posted - 2011.04.16 15:59:00 - [42] Originally by: Block Ukx IÆm not sure I follow your question. The initial margin is 5%. If short seller cannot meet the required margin after a price change then he risks losing his position. The 5% margin should suffice to cover any loss. A daily price change above 5% could potentially end up as a loss from the Exchange. My goal is to use the 0.5 % broker fee to cover potential losses. Won't the broker fee go to cover the sales tax on the initial sale?
Block Ukx Forge Laboratories	Posted - 2011.04.16 16:19:00 - [43] No, the broker fee is a fee for the broker. My intention is to use this fee to offset any potential loses due to failed margin calls. Keep in mind that the bid price is an average weighted price of previous trades. Taxes and fees are taking into account when I place regional orders. The bid price is unlikely to be the spot market price. BSAC Stock Exchange - EVE's only real-time stock exchange
RAW23	Posted - 2011.04.16 16:22:00 - [44] Makes sense. Thanks.
SencneS Rebellion Against Big Irreversible Dinks	Posted - 2011.04.16 16:23:00 - [45] I was going to post this last night but there is a key here I think some people might have missed. Block said "If you open a position at 100mil units and someone is closing a position of 100mil units I take no action." This is a stroke of genius, when it starts up, yes there will be minerals exiting BSAMR Stock piles as new short sells are initiated. However, as short sells become maybe a daily event for some people the amounts could level out. They key here is Block is not going to be buying AND selling minerals for short sell positions. Meaning the Exchange site will simply be telling Block the difference between buying and selling, so he will only EVER had to Buy minerals or Sell minerals, he'll never do both in the same day. The implications of the above solve a LOT of hurdles short selling projects have to get around. Block is in a unique position from most in that he has a massive mineral reserver available to draw from while starting up. Thats probably the largest hurdle anyone trying to do something like this. Theoretical scenario.. Someone short sells for say 3.3 ISK a unit, but a month later it's 3.5 ISK a unit, the short seller has made a loss. However, the Exchange might not make a loss at all. Consider that if it was climbing it's likely more people will be starting NEW short sell positions is high. Hell the guy that made a loss might turn around and open a new position to try to re-coop the loss, negating the incorrect short sell. The outcome could be, Block doesn't buy back high price minerals but sells them instead. The guy that set the initial bad short sell loses his margin, Block collect the entire value, therefor the exchange gained, not lost. Of cause this relies on the fact that people start short selling on those days, so the Exchange could lose out if it's not broad enough popularity. While this does sound awesome, I'm concerned about more of the impact of a continued falling market. There is a possibility that block doesn't buy or sell minerals day after day but keeps issuing ISK for successful short sells. So there is room for failure here, but the more people doing it, the less that room there is for this to fail. Amarr for Life
RAW23	Posted - 2011.04.16 16:31:00 - [46] Edited by: RAW23 on 16/04/2011 16:32:14 Originally by: SencneS While this does sound awesome, I'm concerned about more of the impact of a continued falling market. There is a possibility that block doesn't buy or sell minerals day after day but keeps issuing ISK for successful short sells. So there is room for failure here, but the more people doing it, the less that room there is for this to fail. Is this right? It looks to me like there is no cost to the exchange in a successful short and thus no problem. The exchange will just be paying out the isk it makes by selling high and rebuying at a lower price, which will leave the same amount of minerals in place but also some additional cash in the wallet. As noted above, the danger is failed margin calls not successful shorts as short sellers are not betting against the exchange; rather, the exchange is facilitating a bet against the market.
SencneS Rebellion Against Big Irreversible Dinks	Posted - 2011.04.16 16:43:00 - [47] Originally by: RAW23 Is this right? It looks to me like there is no cost to the exchange in a successful short and thus no problem. The exchange will just be paying out the isk it makes by selling high and rebuying at a lower price, which will leave the same amount of minerals in place but also some additional cash in the wallet. As noted above, the danger is failed margin calls not successful shorts as short sellers are not betting against the exchange; rather, the exchange is facilitating a bet against the market. I'm looking at it form an ISK standpoint. Not the mineral standpoint Consider it like this. Lets say I'm the ONLY one doing short selling, and the minerals keep on falling in price by more then 0.5%. I fire up an position, Block sells the minerals, because the exchange tells him to sell. The price of minerals keeps on falling by 1%. On the day the position is closed, I re-open a new one for the same amount of minerals. Since no amount of minerals has "changed" Block issues me the successful short-sell profits. Now if it keeps on falling and I keep doing the same thing, eventually Block will issue me the total amount of ISK from the first short sell. Since Block has not brought or sold any minerals for all my other positions, but I've each has been successful, I will eventually eat up all that ISK plus all my fees leaving him in the negative. If it helps I can do an excel off the scenario. You're right though the risk for loss is MUCH higher for bad short sells where the minerals are consistently climbing, however in that scenario Block is collecting the margin and fee each time, so his available ISK keeps climbing. In the scenario I post, the opposite happens where his available ISK keeps dwindling. Amarr for Life
Katie Tanaka	Posted - 2011.04.16 16:45:00 - [48] Wait, no sorry, I misunderstood this. Is the short-sell margin requirement seriously going to be only 5% plus mark-to-market on losses? Not short-sale amount plus 5% plus mark-to-market? So for the sake of argument, say the index value is 1K ISK. I go short 100000 units of the index at the market price. That realizes 100M ISK of which 95M ISK is cash and 5M ISK is initial margin. What is to stop me just taking the cash and walking away?
Block Ukx Forge Laboratories	Posted - 2011.04.16 17:02:00 - [49] Originally by: Katie Tanaka Wait, no sorry, I misunderstood this. Is the short-sell margin requirement seriously going to be only 5% plus mark-to-market on losses? Not short-sale amount plus 5% plus mark-to-market? So for the sake of argument, say the index value is 1K ISK. I go short 100000 units of the index at the market price. That realizes 100M ISK of which 95M ISK is cash and 5M ISK is initial margin. What is to stop me just taking the cash and walking away? Profits are distributed at closing. BSAC Stock Exchange - EVE's only real-time stock exchange
Block Ukx Forge Laboratories	Posted - 2011.04.16 17:15:00 - [50] Originally by: SencneS Lets say I'm the ONLY one doing short selling, and the minerals keep on falling in price by more then 0.5%. I fire up an position, Block sells the minerals, because the exchange tells him to sell. The price of minerals keeps on falling by 1%. On the day the position is closed, I re-open a new one for the same amount of minerals. Since no amount of minerals has "changed" Block issues me the successful short-sell profits. Now if it keeps on falling and I keep doing the same thing, eventually Block will issue me the total amount of ISK from the first short sell. Since Block has not brought or sold any minerals for all my other positions, but I've each has been successful, I will eventually eat up all that ISK plus all my fees leaving him in the negative. Remember, there is a 1% spread between bid and ask. So every time you close and open immediately you just lost 1%, so you are better off holding onto the original short. I donÆt see how you can possibly make money by continuously opening and closing your position, unless bid drops by more than 1%; you only make the difference. Short positions are open at bid, but are close at ask. BSAC Stock Exchange - EVE's only real-time stock exchange
Katie Tanaka	Posted - 2011.04.16 17:17:00 - [51] Oh, right. This isn't a short-sale - it's a contract for difference.
SencneS Rebellion Against Big Irreversible Dinks	Posted - 2011.04.16 17:35:00 - [52] Edited by: SencneS on 16/04/2011 17:44:20 Originally by: Block Ukx Remember, there is a 1% spread between bid and ask. So every time you close and open immediately you just lost 1%, so you are better off holding onto the original short. I donÆt see how you can possibly make money by continuously opening and closing your position, unless bid drops by more than 1%; you only make the difference. Short positions are open at bid, but are close at ask. Yes, as I was running the Excel up I realized that it needs to be at least 1.6% in order for the scenario to happen. However the as I continued to adjust the price down something I didn't consider happened, a constant price drop lowers the amount of the margin and the fee, it also lowers the amount of the successful short sell payment. It doesn't matter how high the price is it'll eventually be zero with any reasonable decline in price. The only possible way this would be a concern is if the decline is over 49.036% which has a very very unlikely chance of happening. I don't consider this a concern Amarr for Life
Moto Akimoto	Posted - 2011.04.16 17:44:00 - [53] Hello Block, Q1: Will you be paying interest on the cash balance while an investor is in a short position? i.e. If I sell 100M [email protected] isk = 300M isk, will you pay interest on the 300M balance? Q2: Can a short position use the cash balance increase to go long on another offering within BSAC? i.e. If I sell 100M [email protected] isk= 300M isk, can I then go use the 300M to buy "MEGIF" with the isk? I ask mostly because going short is riskier than going long so I would like to take advantage of the leverage if at all possible. Akimoto 400Ö Indices: Are you a Market Wizard or will you get taken for a ride?
Block Ukx Forge Laboratories	Posted - 2011.04.16 20:22:00 - [54] Originally by: Moto Akimoto Q1: Will you be paying interest on the cash balance while an investor is in a short position? i.e. If I sell 100M [email protected] isk = 300M isk, will you pay interest on the 300M balance? Q2: Can a short position use the cash balance increase to go long on another offering within BSAC? i.e. If I sell 100M [email protected] isk= 300M isk, can I then go use the 300M to buy "MEGIF" with the isk? The answer is no to both questions. Profits will be released at closing. BSAC Stock Exchange - EVE's only real-time stock exchange
Skyler Snow	Posted - 2011.04.16 22:38:00 - [55] Originally by: SencneS The guy that set the initial bad short sell loses his margin, Block collect the entire value, therefor the exchange gained, not lost. I think that's not what will happen. In your example the short started with 3.30 isk. If we account for a 5% margin, this means the margin has been eroded by the time the mineral got to 3.465. Much before that Block would have drawn from the account more isks to reinstate the margin. Assuming that the price at time of closing is 3.50 and the current margin covered happens to be exactly 5%, then at the time of closing the Block would pay back the margin (0.175 isk per unit). The player have only lost the difference (0.10 per unit). It's true that Block will virtualize all movements and "merge" them with the buy/sell orders he already does for the reserve. That's why i think the game based broker fees and taxes are not going to be a problem. Originally by: SencneS Of cause this relies on the fact that people start short selling on those days, so the Exchange could lose out if it's not broad enough popularity. I think not. It will neither lose nor gain based on lack of popularity. It can only lose if the market moves by more than the margin in the time between an update and the next. And eventually if the market moves very fast between an open (or close) short position order and the time Block enacts it. Of course all of the above is according to my current understanding, Block will have to confirm this.
Katie Tanaka	Posted - 2011.04.17 04:17:00 - [56] Originally by: Block Ukx The answer is no to both questions. Profits will be released at closing. Like I said, this is not short selling, it's selling a CFD on an index. For those who want naked short exposure to the underlying, it might make some sense; but for those who actually hold the mineral it's just basically a way to make an interest-free loan to Block.
Vaerah Vahrokha Minmatar Vahrokh Consulting	Posted - 2011.04.17 06:09:00 - [57] Quote: I think not. It will neither lose nor gain based on lack of popularity. It can only lose if the market moves by more than the margin in the time between an update and the next. And eventually if the market moves very fast between an open (or close) short position order and the time Block enacts it. Greed vs fear are the market tenets. But success at the markets is due to asymmetry in skill and information. In Block's case, he has years of experience in the minerals markets and has more in depth knowledge of the specific market structure than most. Block would have to be an idiot to lose on these kinds of deals where he's the market maker. If he knows the market will go up (against the short) he will just buy the retail trader's position and then the retail margin just flips in his hands, like it's meant to be. He does not "lose". If he knows the market will go down, then he sells his big stakes anyway and makes enough to cover for the retail trader gains. Only if he screws big time and the retail trader wins, then he'll lose. Again, like it's meant to be. Furthermore, he may afford as many big screwups as his quantitatively huge reserve allows for. Basically we have the puny retail trader margin against Block's buffer. It takes a "perfect storm" scenario to knock Block down, the rest of the time he'll act as the casino owner: the house wins. Auditing \| Research \| 3rd Party \| Collateral Holding \| EvE RL Charity
Skyler Snow	Posted - 2011.04.17 17:53:00 - [58] Originally by: Vaerah Vahrokha If he knows the market will go down, then he sells his big stakes anyway and makes enough to cover for the retail trader gains. This is a case of losing but losing less than he is able to gain back. There's no doubt he's not going to bankrupt. There is a question of how the shorts operation may affect the performance of the existing reserve operation. The fact that that the reserve can make more than the shorting will eventually lose is true. But the reserve is also a (partially) publicly owned operation. If losses for the shorting op are covered by larger gains the reserve is making under the same market circumstances then the two operations are not independent. Overall there still is a gain. But those with a stake in the reserve and not in the shorting are not going to be happy. Originally by: Vaerah Vahrokha Furthermore, he may afford as many big screwups as his quantitatively huge reserve allows for. Basically we have the puny retail trader margin against Block's buffer. It takes a "perfect storm" scenario to knock Block down, the rest of the time he'll act as the casino owner: the house wins. Is it Block's buffer or a buffer where others have a stake in? If losses from running the short market are covered by gains in the reserve, are gains from running that market reflected in the reserve operation (and in the related bonds)? Is this a separate activity Block will run or a new way of profiting from the reserve which is not separate but part of the reserve operation itself?
Mini Tee	Posted - 2011.04.17 22:58:00 - [59] Will there be stoploss and takeprofit orders? If there aren't right now, they aren't that hard to implement. If someone tells you to short sell he gives you a target and a stop loss price. So you sell the trit, and set up a buy oder at the TP area. When your calculated price exceeds the SL price, you buy back manually. If you could implement something like this I would probably use this service a lot.
Lagruna Zegata	Posted - 2011.04.18 00:20:00 - [60] On the face of it I do think this is a pioneering idea for BSAC to introduce shorting to EVE's market players. Maybe there are a great deal of reserves acting as buffer against huge winning margined short positions in minerals and that everything will run smoothly as purported. The problem I see is.... What if I would like to short planetary vehicles? Or mech. parts/robotics? What if I heard somewhere that CCP is going re-allocate technetium moons and I wanted to short technetium? Or for that matter, even short-sell T2 ships because I felt the prices were going to come down? Margined short-selling in the various parts of the mineral basket can be an exciting idea but it's only a limited suite of items in game. (Even so, I may sign up for a small BSAC account myself.) This is why I made my second-to-last post in this thread to allow shorting any potential item in game with CCP itself being the broker (admittedly, margin shorting wouldn't be possible).

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