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OKEx Unified Account: How does portfolio margin benefit traders and liquidity in reality?

2021.01.20 OKEx

On Jan. 18, we hosted an OKEx Talks with three traders to discuss OKEx Unified Account — here are the highlights!

OKEx will be launching its brand new trading system, Unified Account. Users can simultaneously trade spot and derivatives in multiple currencies from one account, without having to transfer funds back and forth between multiple accounts — making the trading process easier than ever.

In this OKEx Talks, we invited three traders to give their insights into the new Unified Account. Lennix Lai, the director of financial markets at OKEx, moderated this panel with our three distinguished guests:

  • Joseph Chang, co-founder of Liquibit
  • Sam Trabucco, trader at Alemeda Research
  • Danny Yuan, co-founder of 8 Blocks Capital

Below is a brief excerpt of the highlights from this OKEx Talks discussion. To watch the full video, click here!


Lennix Lai: I think the very first question to our guests is: Would you find it really capital-intensive to trade across all the exchanges right now? Not just at OKEx but with all the other exchanges, as well — so, capital-wise, do you think that is actually a concern for trading firms?

Sam Trabucco: To answer that, I actually think I'm going to take a little anecdote from March 12, which is a day that I'm sure anyone in crypto trading remembers. 

Blockchain speed became extremely slow; it was basically impossible to transfer any spot — like BTC, for instance — between two exchanges. It was taking us hours and hours, and that's the exact reason that a ton of different products that were nearly identical between two different exchanges (like, for instance, the OKEx quarterlies and the Huobi quarterlies) were trading at really different premiums on spot for hours and hours. It was impossible to close this spread for a lot of people because they just couldn't get the capital between the two exchanges. This sort of thing was happening across the entire market, in every product. 

That's an extreme example, but a smaller-scale thing is happening all the time. You can't just transfer. You can't decide that you want capital that you have on one exchange to be on another and have it be there instantly. You actually have to move it, and blockchains don't tend to be instant. This is a really large-scale problem for a firm like Alameda, which is trading on every product, on every exchange, and has a ton of different kinds of capital moving around. It's a problem that we actually don't have an amazing solution to. I don't really think an amazing one exists, because the best trades any given time are changing pretty rapidly — especially in a market as crazy as crypto has been lately. 

We might decide within a few minutes we want a huge position in this one product on this one exchange and then it might get much less attractive within an hour, and we have to move the capital across the blockchain to something else. Capital efficiency is a giant concern for us all the time. It's something that we probably spend a much higher percentage of our time thinking about than people might expect and, in general, any move to make capital management more efficient — like moving to a cross-margin system like OKEx's new margin system — just tends to make it so that trading is better because you have more options and you don't have to have a specific concern about what kind of capital you have in a certain place.  It just lets you do more trades, which is always good for us.

Lennix: How about you, Danny? Do you have unlimited capital to trade, so that you don't have capital concerns? 

Danny Yuan: Well, our capital is probably much more limited than Alameda, and it is indeed super intensive to trade across all the exchanges — especially derivatives, which is a majority of what we're trading. 

A lot of exchanges — especially OKEx, Huobi and a few others — require you to have separate funds to trade coin-margined futures and coin-margined swaps. We have USDT-margined futures and USDT-margined swaps, so we need to set aside separate funds in order to trade all these different coins. It gets intensive. 

We're trading over 40 different underlyings, so we would like to fully utilize all of our funds when trading. In order for us to return, you know, a few 100% ROIs every year, we use a decent amount of leverage when we trade derivatives. Because of the risk of liquidations, we want to use a very safe amount of leverage that we deem appropriate for the product, so we usually limit our precision sizes based on the available capital on that particular product.

Lennix: How about you, Joseph? Do you focus on just one single product or do you need to trade a lot, as well?

Joseph Chang: We probably trade up to 20 underlying across, let's call it, eight to 10 exchanges. We have the same problems that everyone else has just mentioned. 

I guess it's useful to compare to traditional asset classes. If you're in equities — you know, FX and commodities — generally, those markets are very developed. You have prime brokers. You have central clearinghouses. You have custodians that can help you leave all of your assets in one place while having the ability to trade on different venues. In crypto, we're not there yet, right? 

So, I mean, there is the need to, in most cases, pre-fund every trade in every venue. I mean, there's some exceptions, but that's generally the rule. It's very inefficient, so you really have to consider all the factors that Danny and Sam have just mentioned to manage risk — and it becomes that, for the same amount of capital, you can take on a lot more exposure and other asset classes than you can in crypto, potentially.

This recap has been edited and condensed for clarity.

Want to try Unified Accounts for yourself? Lean how to test it out here.

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Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involve significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.