Phemex Official Statement on 01/07/2021 Incident
Due to the unprecedented crypto price movements we’ve witnessed recently, and the success of Phemex, our platform has experienced a consistent surge in volume for the last few months. Although we have already taken proactive actions to increase our capabilities, unfortunately, we still experienced some minor issues.
To fulfill our commitment to full transparency, we’d like to take this opportunity to address the incident that occurred on our platform yesterday between 6:15 – 7:00 PM UTC.
We’ve noticed and received feedback on the following issues:
Some of our European customers were temporarily unable to connect or access our services.
An investigation revealed that these network issues were caused by overloads to our data-pushing service centers. The impacted region was experiencing record high volumes at the time that BTC breached the 40K price level.
Other regions were not impacted.
The problem was quickly resolved and the connection was resumed. However, we will follow up with the appropriate technical teams and we will increase our server capacities to prevent such incidents in the future.
Many traders on our BTC contract market likely noticed a couple of unusual wicks.
The first wick (18:21 UTC) was caused by two massive orders. At the time of the incident, two clients had two conditional orders triggered: a $2.8 million sell order and a $4.0 million order immediately after. These unusually large trades eliminated much of the liquidity in our order books. At the same time, the significant price drop led to a large number of liquidations compounding the issue.
We will contact these traders to explain and teach the significant market impacts that these orders can have. Going forward, we will continue devoting our efforts and resources to make sure all traders understand more effective ways of closing large positions progressively. We will also seek new technical approaches to add more protections and warnings for manual traders.
The second wick (18:46 UTC) or issue immediately after the first one relates to actions taken by some of our market makers. As the price of BTC suddenly dropped, along with the huge amount of positions taken by the first wick, market makers executed aggressive protective actions that diminished liquidity and led to a sharp price drop or longer wick. As you may already know, we recently released a VIP program for our institutional clients and market makers. The benefits provided by this program are helping us increase our number of market makers, slowly enhancing liquidity on our exchange. We encourage any interested users to participate in this program. In addition, we will adjust our market maker policies, reducing the type of aggressive actions that lead to such incidents, and enhancing liquidity requirements.
Please note that the first wick was only 4.5% lower compared to other exchanges while the second wick was 4% lower. Despite the minimal differences, we nevertheless feel obligated to properly address and explain all discrepancies to our customers.
Again, although related, these were two separate issues that caused each wick and both of them are and will be fully addressed.
Another recent feature we added is the ability to trigger stop orders with the Last Traded Price instead of the Mark Price. This option offers an advantage in terms of timing or instant execution at desired prices. The Mark Price, on the other hand, is updated every second, if the price changes, this could lead to a potential 1-second delay. However, we still highly recommend triggering orders based on Mark Price exactly for situations like this. No matter how low or how much the Last Traded Price deviates from the Mark Price, your stops will not be triggered unless they hit the target Mark Price. In other words, this essentially protects you from any unusual sudden price changes or wicks that are specific to our exchange because the Mark Price is also based on external prices.
Finally, our main priority will always be to place our customers first and offer the best and most trustworthy services. As such, any users that were negatively impacted (a triggered stop loss experiencing additional loss due to the wicks) by this incident can contact our customer support team to have their case evaluated and compensated.
The best method of contact is to send an email to firstname.lastname@example.org and you will receive a reply within 48 hours. To save time and ensure a faster reply time, please include your UID, Order ID, Position Size, and Time.
We truly apologize for any inconveniences this may have caused and we will continue to strive to become the top exchange in this field. Feel free to contact us if you have any other concerns or comments.