FTX Officially Addresses Contract Position Calculation Issues! Why might the USD balance be negative?

With only one week left until the deadline for FTX claims submissions, at this critical moment, the FTX team has finally come forward to address issues related to contract positions. If you have any doubts about the calculation method for USD balances, this article will provide you with answers!

The FTX Debtors posted additional information for customers with questions on the reporting of derivative positions within the FTX Customer Portal. For the additional information, visit https://t.co/pKhHighLqX

— FTX (@FTX_Official) September 24, 2023

Explanation of FTX Contract Position Issue

In this explanatory article by FTX, the main focus is on contract positions.

If you are unsure whether you need to pay attention to this issue, you can log in to the FTX Claims Website to check the Position section. If this section does not display any information, then there is no need to be concerned.

How are users' contract positions determined?

In the initial claim plan submitted on 3/15 this year, it was assumed that all open positions were closed and calculated into the USD balance. FTX stated that this is consistent with normal exchange operations and is consistent with what account holders would see when the exchange was still operational.

In the amended claim plan submitted on 6/27 this year, all open positions as of 11/11 last year were split into separate items, displaying the size and trading pair of the contract positions. FTX stated that this adjustment was made to meet customer demands.

Why does my USD balance change?

In order to fully display the size of contract positions, the full market value of any open positions as of 11/11 last year was deducted from the USD balance.

How do contract positions affect the USD balance?

The price of FTX.com contract positions is calculated based on the price at 15:00:00 UTC on 11/11 last year. To see the complete USD balance, you need to calculate the contract value at that time and add it back to the USD balance.

FTX stated that the above adjustments were made solely to increase transparency and do not impact the total claim amount.

Why might the USD balance be negative?

Due to the aforementioned adjustments in how contract positions are displayed, it is possible for the USD balance to be negative, but this does not affect the total claim amount.

Using the example in the image below, under the old calculation method, the contract portion would be automatically closed out, and the profit from the contract would be automatically calculated into the USD balance.

However, in the subsequent modification to fully display contract positions, the value of the contract positions is not calculated in USD but displayed in position units. Therefore, if there is a situation where margin is borrowed, it may lead to a negative USD balance.

In the image below, the "1" represents 1 unit of Bitcoin contract worth $12,000. After offsetting with the borrowed margin of -$5,000, the actual USD balance in the account is $7,000, which is still positive.