Seed CX Eyes Crypto Derivatives
The number of swap execution facilities trading digital asset-based derivatives will be growing in the coming weeks as Seed CX expects to go live with trading in the first quarter of 2019.
The facility will launch trading is US dollar-denominated contracts in bitcoin, bitcoin cash, ether, and litecoin pending regulatory approval, Edward Woodford, co-founder and CEO of Seed CX, told Markets Media. Each contract will be physically settled and able to be traded on margin based on a 10-day VAR.
Seed CX also plans to introduce contracts priced in yen and euro later in the quarter.
Although Woodford would welcome arbitrage trades on the platform, he noted that the opportunities to arbitrage between venues have shrunk considerably.
“Just because there is a price delta between two exchanges, it doesn’t mean that there is arbitrage,” he said. “People disagree on whether certain arbitrages exist. For example, a token may be trading at a premium, but people may view that exchange as more trustworthy and are willing to pay a premium on that exchange.”
The new venue is geared for institutional investors and offers FIX connectivity to its primary and secondary datacenters for low-latency and high-frequency trading.
“NY4 is our primary, and we have a failover in Chicago’s CH1,” he said. “The reason that we did that was that the groups that are jumping into the crypto space are typically FX groups and NY4 and NY5 are the hubs for FX trading.”
Woodford expected the firm would broaden its offerings eventually to include tangential products such as instruments based on a token’s hash rate or a binary product based on whether a token’s code forks or does not fork.
Seed CX also has laid the groundwork to support securities-token trading while the US Securities and Exchange Commission continues to develop its guidance on the digital asset class.
Trading venues have a pending broker-dealer license with FINRA and a pending alternative-trading system license with the SEC, according to Woodford.
“A lot of this is overblown in the media right now,” he said. “FINRA basically is waiting on guidance from the SEC. Our goal is to work with regulators and to be in one of the first tranches of approval.”
In the meantime, Seed CX continues to operate CLOB-based spot market while expanding the number of participating market makers.
Woodford declined to disclose the number of market makers currently on the platform but added that the trading venue offers incentives to market makers that meet their trading obligations.
A Fidelity study finds 22% of firms invest in the emerging asset class.
Bcause is expected to go live in the first half of this year.
LMAX Digital was the first crypto currency exchange established by a regulated FX exchange operator.
AMUN Bitcoin ETP is listed on the SIX Swiss Exchange.
Gemini will strengthen institutional investor connectivity.