Huobi Group’s cryptocurrency derivatives trading platform Huobi DM has introduced new features to help prevent liquidations, including a circuit breaker and partial liquidations.
According to an announcement, Huobi DM introduced the new safeguards to help manage risk on the platform and “provide users with a safe, secure, and reliable trading platform.” The new features include a partial liquidation mechanism that gradually reduces the position of a user, instead of liquidating it in a single event.
The mechanism will, per the announcement, automatically start liquidating a position gradually at predetermined margin ratios determined by a calculated exposure. The process will also include a circuit breaker that halts liquidation when “large or unusual deviations between the liquidation price and market price are detected.”
Ciara sun, VP of Global Business at Huobi Group, noted that market volatility in derivatives trading cam lead to “unnecessarily high-risk circumstances if the right measures aren’t in place” to protect users, and added:
Our goal is to safeguard our users' assets while providing a robust trading experience, so we're using this partial liquidation mechanism to minimize the downside without diluting the potential upside.
The new feature, Huobi added, is available to users with no added fees. The trading platform is also lowering its maintenance margin ratio, a key liquidation indicator. The move comes after a widespread sell-off in the cryptocurrency space that saw BTC’s price drop from about $7,300 to less than $4,000 in about two days.
After the sell-off several members in the cryptocurrency community argued the introduction of circuit breakers would be beneficial, as high-leveraged positions are widely believed to have added to the selling pressure and worsened the crash.
Today's price moves in crypto are a strong argument for industry wide circuit breakers. The crypto markets structurally broke today & leading exchanges need to work together to prevent a repeat.@CryptoHayes @cz_binance @brian_armstrong @jespow @SBF_Alameda @JayHao8 @CiaraHuobi
— Tushar Jain (@TusharJain_) March 13, 2020
In the future, Huobi’s announcement added, the derivatives trading platform is looking to add perpetual swaps with up to 125x leverage, and an over-the-counter loan service.
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