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Comment by mkirklions | Hacker News Reader

I cannot imagine letting such insanity happen.

You allow shorts on your exchange, but you dont have controls in-place?

My gosh, have some php email() when >1M in shorts is happening. Send it to a CEOs personal email, or something... (let alone have functions in place to force a realization)

I really am having a hard time understanding how this happened.

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A bunch of people thought they were smarter than every bank and stock exchange out there. That's how this happened.

How could an exchange allow long futures without allowing short futures?

They do require them to math. So this trader’s losses were other traders’ gains. However, when the mark-to-market losses exceeded the loser’s ability to pay up, then they had to close the position and the exchange had to pay up. Looks like they didn’t actually have the assets to do this last part though, which is the only really bad part of all of this. Traders blow up all the time, but you have no business calling yourself a futures exchange if you make other traders absorb those losses. The typical model for a real exchange is for th exchange itself to maintain capital reserves sufficient to make traders whole in these circumstances. OKEx doesn’t really have any business purporting to be an exchange (and couldn’t, legally, under US law I believe) if it isn’t maintaining these capital reserves. Doesn’t seem unusual for this space though.

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