On the 22nd October 2020, around 11:03 CET there was a quick 150$ dump on the XBTUSD pair. It followed that the Okex future curve went below that of Huobi, Deribit and others and was trading quasi at par with Bitmex. Such a brief movement in the basis is very unusual, and you can visualize it in the chart below as a sharp wick down followed by a quick recovery.
Now the problem.. as an arbitrageur myself, when I see such a quick change in the basis I would buy the future on Okex and sell the same somewhere else. However this time I could not do so, as Okex rejected all my orders.
Buy orders could be placed only BELOW the MAX future price which was however below the Index price, effectively not allowing anybody to buy!
In the picture above you can see the MAX buy price set a 12937.47$, that means that any order placed above it should be rejected, still in the order book there are order sitting at 12938$ and 12939$. Suspicious.. and WRONG!
Suspicious because somebody was still trading and wrong because such MIN/MAX limit do not follow the rules made by Okex itself!
Given that I could not place limit orders, I initiated small market orders. To my big surprise even those were rejected, still I could see in the trade blotter BUY orders being filled.
At around 11:20 CET the market recovered 150$ and Okex future term structure was again the same as that of Deribit, Huobi, etc. The opportunity gone, and strangely enough the MAX BUY price was normal again (eg above the index)
The question is “Okex what is going on? And who was able to profit from this when traders were not allowed to trade?”