Self-transaction prevention (STP) appears to be so regular at Binance that the exchange is proud to introduce it.
Contrary to popular belief, STP won’t prevent Binance officials from engaging in customer-against trading. Instead, six years after the launch of Binance, company leaders are providing this “feature” to allow users to cease trading against themselves.
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It seems that the practice is so widespread that it will take many weeks to implement the feature. Customers of Binance may continue trading with one another until October 26 at 16:00 EDT.
That window of opportunity might last longer. Even if STP becomes the default configuration, comprehensive API documentation offers computer codes for customers who choose to keep trading against themselves.
Trading with actual money against oneself
On the surface, trading against oneself could seem ludicrous. It’s a certain method to lose money on trading commissions and, aparently, not much else.
Trading against oneself, on the other hand, inflates transaction volume, a desirable number for marketers to use as a measure of liquidity. A token seems to be well-liked if it is traded frequently.
Self-dealing when carrying out sophisticated or high-frequency deals can potentially simply be a mistake. In fact, Binance bragged that the functionality would stop pointless self-executed orders and lower associated costs. The modifications will also affect API users, who are frequently the most active traders.
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Three self-transaction prevention settings are included in Binance’s new program to safeguard consumers from themselves, including a default EXPIRE_MAKER mode that will stop self-dealing spot and margin transactions as of October 26.
By utilizing the API option selfTradePreventionMode, API users can modify this mode. With the allowedSelfTradePreventionModes parameter, they can also make a request for information about the modes accepted by each trading pair.
Stoppage of the self-dealing exchange
With these improvements to the API, Binance may be attempting to lessen the perception of self-dealing. Many authorities are worried about this prospect even if STP does not stop Binance from trading against its own customers (for its part, Binance emphatically denies that it does so).
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According to Gary Gensler, chair of the Securities and Exchange Commission (SEC), “Crypto has a lot of same concerns – platforms trading ahead of their users… In fact, they frequently trade against their clients because they mark their markets against them.
Self-dealing is frequently viewed by authorities as a practice when a counterparty works in its own interests rather than the interests of its clients.
The majority of self-dealing entails making money off of transactions carried out on another party’s behalf. Examples often include purchasing or selling firm stock prior to completing a sizable buy or sell order for a customer, pursuing a partnership-specific opportunity without informing the other partners, or inappropriately accepting “kickbacks” to favor one contractor over another when awarding contracts.
Trading against one’s own customers is another form of self-dealing, as several exchanges for digital assets were caught doing. After being exposed for stealing client monies to give to Alameda Research, FTX was made to stand out as an especially egregious case. Then, in a move of the utmost irony, Alameda Research engaged in trading with those very clients’ money.
This type of self-dealing in the domain of digital assets dates back to Mt. Gox and its infamous “Gox Bot.” More recently, the Commodity Futures Trading Commission (CFTC) claimed that Changpeng Zhao had transacted against Binance consumers using proxies including Sigma Chain and Merit Peak.
It’s possible that the steps taken by regulators against exchanges, including Binance, alerted the exchange into changing its APIs to lessen self-dealing and client self-trading. It claims that the action will help cut down on pointless fees.
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