Europe's Largest Exchange-Traded Funds (ETFs) Trader Enters Crypto Market Despite Watchdog’s Warnings

On July 5th Bloomberg reported that Dutch speed trader Flow Traders NV has entered the cryptocurrency market despite the warnings of the Dutch Authority for the Financial Markets (AFM) not to buy and sell digital currencies.

Flow Traders NV is making markets in the first exchange-traded notes based on Bitcoin and Ether, according to Co-Chief Executive Officer Dennis Dijkstra. Sweden-based XBT Provider, an issuer of crypto ETNs listed in Sweden, said that the Dutch company has dramatically increased trading of its securities in the last few months.

Right now several U.S. speed traders are making markets in cryptocurrency futures or the underlying currencies. Notably, Flow Traders is the first firm — Europe, U.S., or otherwise — to disclose it’s buying and selling crypto notes listed on regulated stock exchanges.

Dijkstra believes that publicly traded notes or funds will broaden the appeal of digital currencies as an asset class by providing a straightforward and cheaper way of investing in the coins.

He said:

“People underestimate crypto. It’s big, and it is to be regulated very soon. The market participants are much more professional than people think. Institutional investors are interested, we know they are because we get requests.”

The Dutch firm traded $284 Billion of ETFs globally in Q-1 making it the region’s biggest trader of the securities. Cryptocurrencies are particularly attractive because speed traders make the most money in the most volatile markets. The company was hedging its trades of crypto notes with futures contracts managed by CME Group Inc. and Cboe Global Markets Inc. He claimed that the new approach has “big spillover benefits” for Flow Traders NV’s developing foreign-exchange trading business.

The AFM raised “doubts” toward cryptocurrency investments in the middle of June by sending a letter to market participants who are looking to offer crypto investment opportunities. The regulator said that related risks meant that such companies could fall short of any licensing obligations.

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