“The derivatives market has always been attractive for larger investors, but one of the biggest hurdles they needed to overcome has to do with capital efficiency, custody and security,” said Darshan Vaidya, CEO of X-Margin. “Working with Fireblocks to grow X-Margin’s distributed clearing network is an obvious and natural fit given the number of institutional trading firms actively using Fireblocks. The partnership allows institutional trading firms to cross margin and bilaterally trade derivatives without compromising security.”
Crypto derivatives trading requires users to hold funds on exchanges as collateral so that contracts can be funded, making it a high risk for institutional investors, especially given the number of exchange hacks that have happened over the last year. In Q1 of 2020, crypto derivative exchanges saw more than $2 trillion in trading volume, a 314% increase from the 2019 quarterly average. With the increase in activity, it is critical to provide the necessary security for institutions to feel comfortable using some of the newer and more sophisticated financial instruments that have arrived in crypto this year.
“The Fireblocks/X-Margin integration perfectly combines cross-platform collateralization, risk transfer, and settlements into one comprehensive package that encompasses the whole life cycle of a trade. This has been a crucial infrastructure piece that has evaded the institutional digital asset markets until now,” Shiliang Tang, CIO LedgerPrime.
X-Margin is the first ever zero knowledge cross margin system designed to solve a major pain point in the industry. Derivatives trading firms currently need to post collateral with each venue they trade at, even if they have offsetting positions across them. This is extremely expensive, and it increases custody and operational risks. Starting with bilateral derivatives, X-Margin’s proprietary zero knowledge technology allows users to get the portfolio effects of central clearing without needing a central intermediary to verify positions. Users can net risk across counterparties and automatically settle trades.
“Using both Fireblocks and X-Margin together gives us the ability to scale our derivatives trading business by giving us capital efficiency, counterparty credit protection, and secure settlement,” said Paul Eisma, Head of Trading at XBTO.
As more traditional investors continue to enter the crypto derivatives space, it is important that they are able to operate in a secure environment with no inefficient intermediaries. With over $18B digital assets secured per month by the Fireblocks platform, JST Capital, XBTO and LedgerPrime, are now the first customers to successfully trade custom bilateral derivatives with cross margin, utilizing X-Margin’s distributed clearing network.
Fireblocks is an enterprise-grade platform delivering a secure infrastructure for moving, storing, and issuing digital assets. Fireblocks enables exchanges, custodians, banks, trading desks, and hedge funds to securely scale digital asset operations through the Fireblocks Network and MPC-based Wallet Infrastructure. They have secured the transfer of over $70 billion in digital assets and have a unique insurance policy that covers assets in storage & transit. For more information, please visit www.fireblocks.com.
X-Margin is a distributed clearing solution, enabling trading firms to securely trade across multiple venues and counterparties, netting their risk across them. X-Margin harnesses the power of zero-knowledge proofs and Intel SGX enclaves to be the first ever cross margin and settlement solution for derivatives without a central intermediary. Compared to a central clearing house, distributed clearing is more cost efficient, regulatorily light, and better equipped to scale across different asset classes and venues. For more information, please visit www.xmargin.io.