Handling cryptocurrency-related derivatives opens new business opportunities for exchanges. In the case of OKEx, the company is facing a lot of scrutiny. Its recent change of terms pertaining to derivative contracts does not sit well with traders. This also highlights the need for proper regulatory measures regarding these speculative investment opportunities.
Traders Outraged Over OKEx Terms Change
Numerous cryptocurrency exchanges can be found all over Asia. In Hong Kong, OKEx is almost a household name in this regard. The platform processes $1 billion worth of crypto asset trades every single day. They also offer other investment products which are linked to Bitcoin and top altcoins. Derivatives are a very successful addition to the company’s overall products and services.
When the company changed its terms pertaining to derivatives, all hell broke loose. The company has forced early settlement of Bitcoin Cash contracts without warning, according to investors. The Bitcoin Cash network underwent a protocol upgrade on November 15th, which spawned two versions of the network. Exchanges need to take ample precautions to ensure their clients suffer from any disruptions during such events.
According to traders, OKEx failed to give them a fair warning. Due to falling BCH prices at the time, the forced settlement caused significant losses. All of the affected parties are intent on reducing their use of this crypto trading platform. Some even go as far as claiming OKEx is “no longer credible”. One client confirmed to The Star he will file a complaint with the Hong Kong Securities and Futures Commission.
For OKEx’s part, they claim that they acted without notifying traders in order to minimize the risk of market manipulation. Andy Cheung, head of operations at OKEx, explained:
After considering various scenarios, we decided that an early settlement was the most fair and rational decision to maintain an orderly market.
More Regulatory Pressure is Needed
When crypto exchanges make these kinds of decisions, troublesome precedents are created. Hong Kong has not much in the way of Bitcoin regulation at this time. With proper guidelines, incidents like these could have been avoided. OKEx has apologized for any inconvenience caused, but they stand by their final decision. They aim to reduce market manipulation and thus haven’t informed users of this decision ahead of time.
The behavior by this company is not illegal. It is worrisome in different ways, but OKEx has not done anything wrong in legal terms. Cryptocurrency derivatives are very different from their more traditional counterparts. Without official guidelines and rules, companies can do as they see fit. That makes it increasingly difficult for traders to hold service providers accountable if things go awry.
For the company, this forced early settlement is not the only topic of debate. On November 15th, the platform suffered from a technical issue. Traders could not execute orders for over two hours due to an abnormal glitch. This further fueled rumors as to how OKEx can no longer properly manage risk. Hong Kong’s financial regulators will have their work cut out for them in this regard. All of these incidents seemingly warrant further scrutiny in an official capacity.
Are traders right to be upset with OKEx’s actions? How much will this damage the exchange’s reputation? Let us know in the comments below.
Images courtesy of Shutterstock
