Deribit and Paradigm Launch the World’s First Multi-Instrument Block-Trading Solution for Crypto Derivatives
Cryptocurrency derivatives exchange Deribit and Paradigm, the first institutional-grade OTC communication platform, have launched a joint workflow solution for institutional crypto-derivative traders. This partnership represents the next step in catering to growing institutional demand for crypto derivatives and launches the world’s first multi-instrument block-trading solution offered by a crypto-derivative exchange. Block trading on Paradigm is currently live with some of the most renowned institutional trading firms.
This new block-trading solution will enable institutions to directly negotiate crypto-derivative trades with counterparties of their own choosing, via chat on Paradigm. Once agreed, the trade information will automatically be submitted to Deribit for execution and clearing.
Theory of Block Trading Flow Chart
What are Block Trades?
Block trades are privately negotiated, principal-to-principal transactions in futures or options, or spreads and combinations of the two, that exceed certain minimum quantity thresholds. Once traders agree on a price, these transactions are submitted to the exchange for execution and clearing.
In existing financial markets, institutional traders prefer this method of transacting when they believe that there is insufficient liquidity in the order book to execute a large trade at a specific price in a single transaction. In other words, block trades reduce slippage and minimize impact on the market price since the transaction is negotiated away from the order book.
First of its kind
Previously, no other exchange has offered a block-trading facility for crypto derivatives. Instead, institutional traders privately negotiated large trades via Telegram or Skype and then manually coordinated execution on Deribit’s order book. This approach exposed traders to a significant amount of execution-related market risk, especially for spread and combination trades.
“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” said XBTO Group’s CEO Philippe Bekhazi. “When excellent companies operating in a similar space work together by leveraging relationships and sharing ideas, everyone wins – including, most importantly, the end user.” XBTO Ventures is an investor in both Paradigm and Deribit.
Why we partnered with Paradigm?
In addition to the automated blocking functionality, Paradigm also provides an exceptional suite of institutional trading tools. Some of the most desired tools include automated RFQs, a full audit trail, a directory of potential counterparties and the ability to “approve” specific counterparties before a trading relationship is initiated with them. This workflow offers institutions the opportunity to conduct their own due diligence on counterparties in order to satisfy their own regulatory requirements and firm policies. A full set of features on Paradigm can be found below.
Access for Institutional Traders
Crypto-derivative block trading on Deribit will be available both through the Paradigm system and directly via Deribit’s API. Traders will have access to block trades in Bitcoin (BTC) or Ethereum (ETH) backed futures and options, including spreads and combinations of the two products.
The Paradigm platform is accessible to professional traders, by invitation only. Interested parties should submit a request here or join Paradigm’s Telegram channel for more information. Access is restricted to applicants who have been approved by Paradigm following its internal review process. A full list of territories where Paradigm may not be accessed can be found here. At this time, Paradigm may not be accessed by U.S. persons or IP addresses.
Deribit is the answer to those searching for a professional-grade cryptocurrency derivatives exchange. The founding vision was to create an efficient and fair marketplace that could connect traders of all backgrounds and trading styles. The proprietary matching engine allows for extremely high levels of requests per second, giving traders a smooth experience even during times of high activity and volume.
Launched in 2016, Deribit is among the highest-volume crypto-derivative exchanges in the world. Currently, users can trade perpetual, futures, and options contracts. Furthermore, Deribit remains the only exchange offering European-style cash-settled crypto options and continues to set the standard for the rest of the industry.
Paradigm is an institutional-grade communication platform that automates price negotiation and settlement workflows for OTC digital asset traders. The firm’s mission is to bring traders together and drive efficiencies in their workflows so that they can focus on what matters most: trading.
Paradigm is a privately funded company backed by XBTO Ventures, Vectr Fintech Partners, Monex Group, and some of the most prominent angel investors in the OTC markets.