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Special Events Handling
Special events that include but are not limited to airdrops, forks and hash attacks may necessitate exceptional actions to preserve market integrity.
Special events may make it necessary to change the constituents and/ or their weights of underlying indices of our derivative contracts. Such changes may have an impact on funding rate of perpetual contracts and settlement prices of fixed expiry futures and options contracts.
Arounds special events , we may adjust options contracts on the principle that to the maximum extent possible the position of the market participants remains the same as the pre-event. The objective of the adjustments will be to ensure that the relative status of option positions with respect to pre and post-event doesn’t change ,i.e. at-the-money, in-the-money and out-of-money options keep the same status after the event as before the event.
Examples of possible adjustments
Airdrops: Strike prices may be be adjusted downwards using a fair price estimate of airdropped token
Forks: Strike prices may be be adjusted downwards using a fair price estimate of the forked token
The rationale for downward adjustment of strike prices is that value of airdropped/ forked token can be considered to have been extracted from the original token. However, the blockchain ecosystem is extremely dynamic and unforeseen situations do arise. For e.g. in the case of a hard fork, all the three scenarios are possible: (a) forked token's price is only a tiny fraction of the original token's price, (b) forked token gets ample support from the community and its price is more or less the same as that of the original token and (c) the forked token captures all the value and the original token's price crashes. Same adjustments will not work in all the three scenarios.
The adjustment required in wake of a special event depends several factors such as the nature of event and community response. Therefore, Delta Exchange will make decisions about adjustments to options contracts on a case by case basis, while trying to give as much advance notices to market participants as practically possible.
Delta Exchange, on its discretion, may find it appropriate that a special event doesn’t apply fairly to all market participants and deem it an ordinary event. Additionally, in order to maintain the contracts aligned with its peers, no adjustment may be made if key derivative platforms do not adjust contracts\ prices post event. Furthermore, Delta Exchange will describe its specific policy in cases events that can be anticipated in advance.