Overview and History
2017 and 2018 were the year ICOs. 2019 was the year of IEOs. In 2020, more and more users are agreeing that is the year we see mass adoption of derivatives and futures trading.
Before, if you wanted to see 2x gains, you’d have to wait for the coin you’re trading to actually double in price. This can take quite some time, even for the best coins like Bitcoin. But with the
volatility of crypto currencies in general, 10% moves are things you’d see everyday. With derivatives trading, you can finally get the same 2x gains even with just 10% move of a coin. Some of the more adventurous people would even use 100x leverage. This means a 1% move up or down could either double or bring their balance to zero.
With that in mind, we are going to compare OKEx against the other big crypto derivatives platforms to see which one will come out on top. We will be grading exchanges based on different criteria from product details to exchange security.
Product Variety
There’s a whole host of different derivatives products available in the traditional markets. The most popular ones are slowly making their way and offered to crypto traders and investors. We will focus on the three most common products: Futures, Perpetual Swaps, and Options.
Perpetual Swap Contracts
Perpetual swaps have become the most popular derivatives product in the crypto space. Why? It allows traders to use upto 100x leverage while following the asset’s underlying price. It mimics the spot market price. Traders can long or short a position to profit from the increase or decrease of a coin’s price.
For perpetual swap contracts, OKEx offers both coin margined or USDT margined options. Each one has its own benefits. USDT margined means users can easily switch between different tokens and makes for easier profit calculations (in USDt). For coin margined, users get profit in terms of the coin while also having the coin’s value appreciate in value. In a bull market, users would generally like to measure their gains in BTC, while in a bear market they’d like to measure it in terms of USDT. By offering both, OKEx users have the freedom to choose how they’d like to measure and settle their gains and gives them flexibility in their trading approach.
Other derivatives platforms offer only one of the two. Bitmex and Bybit both offer coin margined trading while Binance and FTX both offer USDT margined trading.
Futures Contracts
Unlike perpetual swap contracts, futures contracts have an expiry date. You can trade up to a max leverage of 50x or 100x depending on the exchange. OKEx offers the widest variety of Futures products. They have weekly, bi-weekly, quarterly and bi-quarterly contracts. This is available for all 9 of their trading pairs. The only other exchanges that offer futures are BitMex and FTX. Both BitMex and FTX only offer Quarterly Futures and Bi Quarterly Futures only for Bitcoin Pair.
Options Trading
OKEx launched their options trading market at the end of 2019. Options trading gives contract holders the right to buy or sell an underlying asset on a fixed day in the future. This is a great way to hedge the value of your asset without necessarily selling it. It works as an insurance policy for the asset that you have. The longer the insurance, the more you will have to pay for it. The only other exchanges that offer Options are Binance and FTX.
Binance Options are actually available on their Binance JEX platform. So this is not integrated within the main Binance platform. Given this, liquidity is very low and order books are still very thin. In an effort to keep the mimic the spot exchange’s view, it has turned into a confusing experience.
Options trading offered by FTX, works on a quotation request format. This is a very troublesome experience since it has to be a long wait period. This shows the low liquidity for their options trading at the moment. It’s like filling out a Google form to place an order and see if someone will sell you the contract at the price you like.
OKEx Options offer the cleanest and most intuitive options trading experience among the three crypto exchanges that offer it. The Options discovery tab is really helpful especially for those who are new to options or are just trying it out. It asks a series of questions about your assumptions on BTC’s price on a given date. It then offers you a good selection of products that will best fit your view. The main options trading page is also very intuitive seeing the bid and ask price for each of the strike price. OKEx undoubtedly has the best options product offering in the Crypto Market right now.
Order types
One thing that is most impressive about OKEx is the number of order types available. People who come from trading in traditional markets who are used to these will be happy to see these advanced options.
Limit Order — The basic order type is the limit order which fills your order after you specify your price and quantity.
Advanced limit — brings out an order option dropdown. It lets you choose between Post Only, Fill or Kill and Immediate or Cancel (IOC). Post only never takes liquidity and makes sure the order is a market maker. Fill or Kill makes sure the buy/sell order is executed or canceled entirely without partial fulfillments. IOC is the opposite of the Post only in that any portion of an order that is not filled immediately will get cancelled.
Market Order — Market order asks you for the quantity of a certain coin you’d like to buy or sell. It will then process that by buying or selling at the best available market price immediately available.
Stop Limit — This is similar to the limit order but the order will be placed only after the trigger price indicated by the user is hit. The user will enter both a limit price and a trigger price.
Trail Order — (Available only in OKEx and FTX) — This allows users to set in advance strategy for significant swings in the market. When the last price reaches maximum (or minimum) market price after a trail order is submitted (1±user-defined callback rate), this triggers the order to be executed on the market.
Iceberg (Available only in OKEx) — An iceberg order is an algorithmic order type allowing users to avoid placing a large order to avoid slippage. An iceberg order automatically breaks up a user´s large order into multiple smaller orders. These orders will be placed on the market according to the latest best bid and ask price as well as the parameters set by the user. When one of the smaller orders has completely filled, or the latest market price has deviated significantly from the price of the current order, a new order will be placed automatically.
TWAP (Available only in OKEx) — Time-weighted average price (TWAP) is the average price of an instrument over a specified time. TWAP is a strategy that will attempt to execute an order which trades in slices of order quantity at regular intervals of time as specified by users. The purpose of TWAP is to minimize the market impact on basket orders. This helps save you from sudden large scam wicks.
Trading Pairs
One of the first things new users will look at will be trading pairs. They like to have a wide array of pairs to trade from. But aside from just listing and having these pairs, it’s also important to support liquidity and trading volume for each.
OKEx offers 9 trading pairs: BTC, LTC, ETH, ETC, XRP, EOS, BCH, BSV, TRX, DASH, LINK, NEO.
BitMex offers 8 trading pairs: BTC, ADA, BCH, ETH, LTC, XRP and TRX.
Binance offers 24 trading pairs: LINK, BCH, XRP, ETC, LTC, BNB, EOS, XTZ, TRX, ADA, ATOM, XMR, DASH, XLM, ZEC, NEO, BAT, VET, ONT, IOTA, IOST, QTUM
ByBit offers 4 trading pairs: BTC, ETH, XRP, EOS
FTX offers 25 coin trading pairs: BTC, ETH, EOS, XRP, BNB, BCH, BSV, ETC, USDT, HT, ALGO, LTC, TRX, OKB, LINK, XTZ, MATIC, XAUT, ATOM, ADA, PAXG, TRYB, TOMO, BTMX, DOGE
Trading Volume
Identifying the real trading volume of exchanges has been tricky as many exchanges report higher volume than what they really do to entice users. This is the volume determined by Alameda Research, one the the biggest research and trading firms in the crypto space. They process around $500m worth of transactions daily across different exchanges just for them and their clients.
According to them, the total derivatives market handles around $20B everyday. Here is a breakdown of the top derivatives exchanges as of March 2020. OKEx consistently ranks in the top 2 exchanges beating even beating out BitMex which is most known for it.
Liquidity
In measuring for liquidity, we measured the Bid-Ask spread between open pending orders. A lower ratio means a lower spread showing more liquidity and less slippage for users. OKEx ranks #1 with a Bid Ask spread of 0.01bp. It may not seem much for retail traders but this is very important for users of trading algorithms and high volume high frequency traders.
Technical Capabilities
Risk Control Capabilities
When it comes to determining Mark Prices for their derivatives products, each exchange has their own way of calculating this. This is extremely important to avoid wild swings in prices with outlier market actions in one exchange.
OKEx — (Based on the weighted average of top 5 exchanges index) If the price of any exchange deviates more than 3% from the median price of all exchanges, the exchange’s price will be bounded within median price * 0.97 and median price * 1.03
BitMex — (Based on the weighted average of top 5 exchanges index) If the price of any exchange deviates 25% or more than the median price of all echange, this price will be removed. If the price of deviates is less than 25%, the price will be take in counted
Binance — (Based on the weighted average of top 6 exchanges index) If the price of any exchange deviates more than 5% from the median price of all exchanges, this price will be counted as 0 in calculation.
FTX — (Based on the weighted average of top 7 exchanges index) All prices will be weighted average. All the prices are limited within 0.3% fluctuation of median price.
Huobi — (Based on the weighted average of top 4 exchanges index) If the price of any exchanges deviates ±10% than median price (including the exchange with price deviation itself), the deviation price will be counted as±10% of median price.
System Trading Performance
When it comes to trading, the exchange’ trading engine must be ready to handle an extreme amount of volume and transactions at any given point in time. OKEx high performance trading engine can handle upto 4 million transactions per second. This helps avoid system overload and system crash. The worst thing that could happen is for your orders to not trigger especially during time of high volatility or not being able to take control of trades. This could result in millions in losses for users.
Next we look at API limits. A huge volume of trades happening right now are all done via APIs. Traders that utilize bots for trading will require tons of data being pulled (data requests) and pushed (order submissions). The most important aspects are fast order fills, fast data push and high speed and high volume API limits.
Conclusion
Overall OKEx derivatives platform offers a very comprehensive set of products and features which they consistently improve and add on to. They are able to manage an airtight security without sacrificing the user experience. It is no wonder a huge chunk of volume goes through them. It shows people’s trust to the platform. They make the derivatives experience easy, intuitive, and enjoyable offering a wide range of services and features that is being enjoyed by both beginners and experienced traders. Their system can be relied upon even on times of extreme market volatility and volume. After reading this article, it’s safe to argue that OKEx is definitely one of the best, if not the best, derivatives trading exchange available in the market right now.
