It has been wild. We must admit we have been closely monitoring events just like everyone as they have been unfolding. To say we are shellshocked about the collapse of FTX is putting it mildly. The poster child of the crypto industry turns out to have beeen smoke and mirrors.
While we will not comment on anything in specific we figured it might be worth explaining what is the difference between CFD/FX brokers & Crypto derivative exchanges. CFD/FX Brokers have been around for a very very long time. To be quite honest, the very first reiteration of our business type was known as a "bucket shop". The term has nowadays become a derogatory term for brokers that work only as a Market Maker (so called Dealing Desk). That being said the industry has been around since the end of World War I. However, unlike cryptocurrencies, this business is actually extremely well regulated and the rules are clear - the principles that are laid out by MiFID II and some from Dodd-Frank are known to virtually all players in the industry. Here we wil layout some differences between us and a crypto-derivative exchange:
1. We don't match trades on our platform like crypto-derivative exchanges. We have a Liquidity Provider that onboards our client trades and then matches among other Liquidity Providers. Our LP is a Prime of Prime LP that aggregates liquidity with 21 other Prime LP's including Tier 1 banks (for Forex). This is a process that has been setup both technologically and from a regulatory stand point for over 30-40 years. The technology behind our liquidity is more or less used by all brokers around the world including the very top dogs.
2. Our exchange feature on our website is a convinience tool. We try not to onboard any risk around specific Cryptocurrency movements and we don't build around the idea that we are an exchange. It is intended as a very quick tool if you need to top up margin quickly from existing balances - it is not a core feature.
3. We support a very limited number of cryptocurrencies and ever fewer for trading balance collateral. Again this is to limit risks. The way this works is - we have so called "Margin Accounts" at our Liquidity Providers. We have denominated Liquidity Accounts in the differrent collateral. Each is funded seperately. As a matter of fact because we offer higher leverage to clients than what our LP's give us, we have strict rules on leverage for higher balances and we are often overcollateralized to client balances in the margin accounts in order to maintain good offering of margin trading.
4. Our focus is traditional markets - to be fair, we think our product is supperior in its CFD form to what you see on the match-trading derivative exchanges, with their questionable algo's and Market Makers, even at a slightly higher costs, however, so far we have had fairly limited success in this space. Our traders remain mostly focus on traditional markets.
5. We hold no exposure to any cryptocurrency exchange. All of our counterparties come from TradFi and are before all TradFi companies that are also within the cryptocurrency space. They are all regulated entities with licenses in Cyprus, Estonia, Dubai & etc.
