Gemini exchange sees all time highs, then reverses trades

[BitcoinXio]

As what many will probably see in the news shortly, Gemini bitcoin exchange saw some all time bitcoin highs when someone placed a large trade quickly filling many open bitcoin orders that were on the exchange.



The exchange saw a spike in trading volume as shown in some charts prior to today reaching a high of $2200 USD on the exchange:



However it appears the large trade made yesterday is being reversed by Gemini, as the trade was "made in error", and all the orders that were filled are being reversed. Here is the email that just went out about the reversals:

On the evening of Friday, 13 November 2015, a Gemini customer notified us that they had placed a very large market order on the exchange in error.

After reviewing the trade, our account review team and executive management determined that the trade was made due to customer error, and meets our criteria for reversal as defined in our terms of service. Following this determination, we reversed each trade that resulted from the market order.

You are receiving this email because you were the counterparty to one of the trades that took place as a result of the erroneous customer order. You may notice that your account balances have changed as a result. You will also see an admin credit and debit entry in your transaction history on Gemini for the trade reversal.

Gemini customers are ultimately responsible for ensuring the accuracy of their orders before placing trades. Trade reversal decisions are made fully at the discretion of Gemini management in cases where the erroneous nature of the trade is clear, notification by the customer is swift, and the impact on all affected parties has been considered and weighed.

We understand you may have questions related to this trade reversal, and encourage you to write us with any questions or concerns you may have.

Thanks,

Gemini Support

The exchange went down last night for maintenance to reverse the trades, per the tweet from Gemini.
https://twitter.com/GeminiDotCom/status ... 1577128960

[GaryDavisIRL]

Really shortsighted move on Gemini's part. They absolutely should have foreseen the myriad possible complications of having such a thin order book, and their trading software should either have disallowed the trade or requested multiple confirmations for it. They've exacerbated the issue by forcing the responsibility for the problem onto the shoulders of the traders who had placed sell orders in good faith rather than the shoulders of the single trader who placed a buy order in error, and in doing so will have lost the confidence of the majority of traders that had sell orders executed in this debacle.

I know that Gemini isn't really geared towards the small trader and it's trying to position itself as an entry point for the larger investor, but by effectively defecating on the business that they do have for the potential business that they don't, they've created a situation whereby smaller traders (who seem to be providing all the liquidity on their market at the moment) will be loathe to trade on their exchange. Not the best move to ramp up business.

[bitkilo]

This is embarassing for Gemini to so the least. I hope some compensation may be consitered for anyone who was inncovencied from this.
Software should have stopped this trade it should never have gotten to this stage.

[GaryDavisIRL]

This is embarassing for Gemini to so the least. I hope some compensation may be consitered for anyone who was inncovencied from this.
Software should have stopped this trade it should never have gotten to this stage.

Absolutely, though I reckon the chance of compensation is rather low indeed; they may reduce trading fees for a period of time for affected customers but I imagine that's as far as anybody will come to any form of compensation.

Their software should indeed have prevented the trade from executing when the price was going to increase past, say, ~15% over the initial 'last' value before the buy order began to be filled, and the fact that they do not have such software in place makes me question various technical aspects of their exchange. If they couldn't foresee this happening (as any exchange rightly should) and implement software to prevent it, what's to say there aren't also unknown issues with more important aspects such as their security implementations? Personally - and this is just my two satoshis - but I would have very little confidence in an exchange that reverses trades due to the lack of properly implemented software. A technical error may give grounds to reverse a minimum amount of trades, but even then if the exchange can comfortably cover the costs then trade reversal should not even be considered.

[LiteCoinGuy]

i heard that they have to do it as a regulated exchange and under certain circumstances. (i dont know these US Laws)

[CryptAxe]

There could be some law, I don't know. Certainly would have been interesting if Gemini just made the customer who added an extra 0 eat his losses and have a mini bitcoin bubble on one exchange though.

[BitcoinXio]

There could be some law for a technical glitch that caused the error, which maybe the customer could argue they didn't have any safeguards in place to prevent such a thing. Either way, Gemini goofed on this, and the right thing to do would have been to eat the cost and reimburse the trader and let the trades be and not reverse them. The ramifications of them reversing them are way worse in my opinion.

[djskibo]

Posted this in a different thread and have deleted it, but:

In the end, there were two main parties hurt. Savvy traders, like those who understand the liquidity of the exchange and use that to determine their trades were hurt. And Gemini’s reputation was hurt. Gemini bills itself as an exchange for Institutional Investors however this is where they have fallen short so far. They do not have rules in place, like most mainstream New York exchanges, that decide outcomes in an unbiased way.

Safeguards, like the automated flagging for abnormal orders were not effective or non-existent. Do they really have these safeguards coded into the platform already, or do they just say the platform will do that?

Throughout this whole ordeal there has been a lack of timely communication. It has taken an average of two to three days per email sent to receive a response. They also do not attach a specific representative to complaints. I am not sure who I am questioning, complaining, demanding, talking to when receiving these emails.

For the regular investor, like myself and many of the users affected in this situation, Gemini exchange might not be the best place to trade bitcoin right now. From the looks of it, there are only a handful of bots that provide liquidity to the exchange with limit buys and sells of around 25ish BTC. These bots constantly battle to front run your limit orders, and remove their support limit orders every few seconds making it hard to buy or sell with little slippage. Also, this is definitely not helpful for the institutional traders with a large account balance to establish a position, unless they themselves are in charge of the bots.

[BitcoinXio]

Posted this in a different thread and have deleted it, but:

In the end, there were two main parties hurt. Savvy traders, like those who understand the liquidity of the exchange and use that to determine their trades were hurt. And Gemini’s reputation was hurt. Gemini bills itself as an exchange for Institutional Investors however this is where they have fallen short so far. They do not have rules in place, like most mainstream New York exchanges, that decide outcomes in an unbiased way.

Safeguards, like the automated flagging for abnormal orders were not effective or non-existent. Do they really have these safeguards coded into the platform already, or do they just say the platform will do that?

Throughout this whole ordeal there has been a lack of timely communication. It has taken an average of two to three days per email sent to receive a response. They also do not attach a specific representative to complaints. I am not sure who I am questioning, complaining, demanding, talking to when receiving these emails.

For the regular investor, like myself and many of the users affected in this situation, Gemini exchange might not be the best place to trade bitcoin right now. From the looks of it, there are only a handful of bots that provide liquidity to the exchange with limit buys and sells of around 25ish BTC. These bots constantly battle to front run your limit orders, and remove their support limit orders every few seconds making it hard to buy or sell with little slippage. Also, this is definitely not helpful for the institutional traders with a large account balance to establish a position, unless they themselves are in charge of the bots.

I'm going to agree with you completely on this and say that this is going to be a big learning curve for Gemini. I don't think this one event will knock them out completely, or make them lose enough customers where they have close down. I think what it will do for them is help them build a better system, and really evaluate any holes they have and make it better for all traders so down the road this type of event doesn't happen again. At least that is what I would hope would happen, as they have seen pretty responsive to feedback and have put in a ton of money into this project and I don't see they bailing after so much invested. If anything the exchange will be improved and will be better. But I think they will lose *some* customers over this, and they know that, and maybe they are prepared for that too.

[vanilladev]

In the united states causing a "flash crash" is illegal and punishable under federal law. The CFTC and Securities and Exchange Commission take these events very seriously. It is no different with a "flash pump". I presume without reversing the trade the customer could sue for damages claiming a fault in their trading platform. Gemini had no choice, their attorneys run the show with the guidance of the SEC agent that is assigned to them.

Thank you for your support.

[CryptAxe]

In the united states causing a "flash crash" is illegal and punishable under federal law. The CFTC and Securities and Exchange Commission take these events very seriously. It is no different with a "flash pump". I presume without reversing the trade the customer could sue for damages claiming a fault in their trading platform. Gemini had no choice, their attorneys run the show with the guidance of the SEC agent that is assigned to them.

Thank you for your support.

Man, I would not want to operate under those conditions. Having people over my shoulder telling me I have to make stupid decisions like that!