Interview with the person in charge of Binance Futures: Why does Binance Futures have 125 times leverage?
Author | Qin Xiaofeng
Editor | Lu Xiaoming
Produced | Odaily
（Aaron Gong）
Author | Qin Xiaofeng
Editor | Lu Xiaoming
After two months, Aaron Gong, director of Binance Futures, accepted an exclusive interview with Odaily and introduced the current operation status of Binance Futures.
The following is the transcript of the interview, organized by Odaily:
Aaron Gong had previously worked at CME (Chicago Mercantile Exchange) for seven years, and was deeply involved in the development and promotion of several new product contracts, including CME Bitcoin futures.
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Aaron Gong：The following is the transcript of the interview, organized by Odaily:
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1. The $10 million risk fund is the bottom line for users
1. Odaily: On September 13, Binance Futures was launched. Could you please introduce the current operation situation?
On the first day of Binance Futures’ launch, the trading volume reached 19,253 bitcoins; on October 3, the single-day trading volume has exceeded the trading volume of the BTC/USDT trading pair in the Binance spot market; the current highest trading volume ranks No. 1 on Skew two.
On the 25th of last month, after the news that the country supported the blockchain came out, our transaction volume also increased significantly, reaching a maximum of nearly 3 billion US dollars. Overall, we have been online for a very short time, only one and a half months, but the growth rate is already very fast.
Aaron Gong：Our contract is a forward contract, that is, a price unit calculated by using stable currency as profit and loss. Among stablecoins, USDT has the best liquidity. Later we will hold a Cross Collateral, and other cryptocurrencies can also be used as margin.
The first batch of listed currencies is only BTC/USDT. Of course, this is only for a short period of time. We will deploy more trading pairs in the future. At present, other trading pairs have also been tested internally, and it is expected that at least one more trading pair will be launched before the end of the year.
(Odaily: What about options?) We will consider options, but we haven’t reached this point yet. Our next focus is to add more trading pairs first.
2. Odaily: When Binance Futures was first launched, it only had 20 times leverage, but now it has reached 125 times. This multiple far exceeds other mainstream contract exchanges. What is the starting point for doing so? Will there be a thousand times leverage in the future?
First of all we attach great importance to customer feedback. In fact, for me, I think 20 times is very high. But after reaching 20 times, many customers feel that 20 times leverage is not high enough, so we just follow the needs of customers and increase the leverage ratio.
Aaron Gong：The figure of 125 times is also calculated by us, including the users who use leverage in the market, their preferences, the threshold of the highest risk, etc. It is not the result of brainstorming. At present, most users still choose the interval below 100 times.
Of course, there will also be restrictions on the use of 125 times leverage, and 125 times can only be opened when the nominal value of the position is less than 50,000 US dollars. We recommend that customers choose the leverage that suits them according to their risk tolerance.
As for whether there will be a thousand-fold leverage, few users currently have this demand, and we will not consider it for the time being.
3. Odaily: What are the current advantages of Binance Futures?
I think the main advantages are the following:
Binance Futures' matching engine speed reaches 100,000 orders per second, which is at the Nasdaq level, and this is one of our core advantages. This is more evident on the user side. For example, when the market fluctuates sharply or the trading volume increases significantly, the exchange has no downtime or order delay. We can host 1 million user visits at the same time, and we can continue to improve in the future.
There is a very humanized improvement in the risk control design, and the mark price is used for closing positions;
When the market fluctuates violently, our venture fund will take the initiative to take over a large number of open positions to reduce user risks;
Aaron Gong：Binance’s spot market has obvious advantages, and few exchanges have spot liquidity comparable to Binance; for users, spot is a good hedging channel;
The handling fee is currently the lowest in the industry, and there is still a 50% discount in the first three months of going online (the deadline is still one and a half months away);
The smart liquidation function, the system checks each transaction, and the forced liquidation will automatically stop when it is higher than the maintenance margin, and the position will be reserved, and there is no concept of liquidation.
Aaron Gong：4.Odaily: Binance Futures advertises that there will be no splitting of positions, how to realize it?
Even if the market is violent, Binance Futures will not be distributed evenly. We have designed many mechanisms to protect users during the product development process. First of all, our insurance fund takes over the client's closed position, and the risk of liquidation is borne by the insurance fund. Then, when the insurance fund cannot take over so many positions, it will start the automatic lightening of the counterparty's position.
At present, the insurance fund has 10 million US dollars, which is funded by Binance itself. If it is used up in the early stage, Binance will replenish it.
5. Odaily: In terms of market expansion, does Binance have any new plans next?
Aaron Gong：I want to emphasize that we want to expand the entire ecology, not a stock game. Next, we will attach great importance to the creation of the entire trading ecosystem.
Based on my personal experience, a mature trading ecosystem, especially contract trading, is mainly composed of three types of customers: the first is hedging and arbitrage customers; the second is market makers; the third is speculative customers.
Aaron Gong：The needs of these three types of customers are actually different, but they are very interdependent on each other. Therefore, we have launched more targeted services to attract such customers. For example, we have launched a new market maker plan at the beginning of the month.
In fact, we are not many people, and the contract team adds up to about 20 people. But we are also expanding now, and the contract department is also hiring.
7. Odaily: Occasionally, there are "pins" in encrypted exchanges. What do you think?
"Inserting pins" is not unique to the currency circle, and this behavior also occurs in mature markets in the United States. For example, on May 6, 2010, the US Dow Jones Index was pinned, and it plummeted by nearly 1,000 points in a short period of time. CME has also had pins. For example, some new products such as silver will occasionally be pinned during periods of inactive liquidity.
Aaron Gong：As an exchange, Binance’s job is to protect users. From the perspective of our exchange, what we can do is to design a better risk control system and provide better technology. When such extreme market conditions occur, the interests of users can be protected to the greatest extent. Therefore, our closing price is based on the spot index, which is the comprehensive price of multiple trading platforms. If there is a change in the price of a certain trading platform we refer to, we will also remove abnormal data in real time.
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Aaron Gong：2. From CME to the encryption market
1. Odaily: Could you please introduce your previous work at CME?
During my work at CME, I was deeply involved in the development and promotion of several new product contracts, including CME Bitcoin futures. As the leading futures exchange with the longest history and the largest trading volume in the world, CME launched Bitcoin futures in December 2017, which had a huge impact on the entire traditional industry and the cryptocurrency industry, and subsequently led more institutions to Enter the Bitcoin realm.
2. Odaily: You were engaged in traditional finance before, why did you finally enter the cryptocurrency industry?
In fact, I myself had a skeptical attitude towards cryptocurrencies at the beginning, which was also the common view of most people who were engaged in traditional finance at that time.
Aaron Gong：The later change in attitude was mainly related to an internal training of CME. At that time, CME invited a prestigious trader in Chicago to give us a lecture on options. Two things were mentioned at the training meeting: First, options were traded on CBOE (Chicago Options Exchange) for the first time in 1973. Today, the annual trading volume of options Second, in 1973, the research report "Option Pricing Model" by Black and Scholes was born, for which Scholes won the Nobel Prize in Economics.
