The increasing demand from institutional investors has made Deribit and Paradigm to team up to launch multi-instrument block trading solution for crypto derivatives.
The innovation will allow organizations to use the Paradigm chat for direct transactions with counterparties at their discretion. After agreeing on a transaction, trade data will be submitted for the Deribit execution and clearing automatiсly.
According to Bloomberg, the function is the first of its kind, since previously institutional traders had to agree on large trades through messengers, and then manually coordinate execution in the Deribit’s order book. The method was high-risk, especially if we take into account spreads and combined trades.
Talking about the new service, XBTO Group’s CEO Philippe Bekhazi said that for the first time institutions that trade crypto derivatives in large volumes can negotiate privately on the Paradigm platform, after which the trade will be automatically executed, margined and cleared at Deribit and displayed on the public tape as a block trade, eliminating any execution risk associated with the order book. He said:
“When excellent companies operating in a similar space work together by leveraging relationships and sharing ideas, everyone wins – including, most importantly, the end-user.”
Deribit’s CEO, John Jansen, reportedly said the new service will offer block trades with a minimum of 40 Bitcoin and 800 Ether or approximately $400,000 and $150,000 for options contracts linked to those cryptocurrencies.
Ten top crypto trading firms have already signed up to use the service, with Paradigm founder Anand Gomes naming QCP Capital in the report.
As per its website, Paradigm offers tools allowing over-the-counter traders to automate price negotiation and settlement. Using Paradigm’s messaging service, parties can set up the options trades, which are then then settled and cleared at Deribit. Commonly, traders use Telegram to carry out such negotiations.
According to Bloomberg the Amsterdam-based Deribit is not regulated in the Netherlands, since local regulation defines derivatives as cash-settled contracts. However, the exchange has the safety net of an insurance fund, should traders default on payments due to issues like bankruptcy.
Back in March, Galaxy Capital-backed institutional trading firm Caspian launched trading in crypto derivatives through an integration with Deribit’s platform.