Hong Kong-based cryptocurrency exchange OKEx angered many traders last week with a controversial decision to force early settlement of Bitcoin Cash futures contracts. The exchange made the move without warning, altering the set terms of $135 million in futures contracts.
In a statement last week, the exchange defended its actions by suggesting that it was simply trying to protect its users from increased volatility:
Due to the upcoming hard fork, strong volatility is observed in the BCH spot and futures markets. We expect an even greater volatility during the hard fork that may cause large-scale impacts, such as cascade liquidation.
The final outcome of the BCH hard fork is still unpredictable, and so are the responses of other constituent exchanges to the new forked coins. Between the hard fork and the delivery data of BCH1116 contract, OKEx may lack time to respond to the market.
OKEx head of operations Andy Cheung also defended the exchange’s decision to not notify customers and said that such warning could have led to market manipulation. He told Bloomberg:
“After considering various scenarios, we decided that an early settlement was the most fair and rational decision to maintain an orderly market.”
The sudden change to the contract terms left some traders with unexpected losses:
The move blindsided traders including Qiao Changhe, who said his fund lost $700,000 because its hedging position on OKEx was abruptly closed at a level that didn’t reflect prevailing market prices.
According to Bloomberg, Qiao and at least four other OKEx traders have indicated that they will be reducing their activities on the exchange or stop trading there altogether. In addition, one trader has reportedly complained to the Hong Kong Securities and Futures Commission.