A Big Deal for Crypto? B2C2 Executes First NDF
Posted by Colin Lambert. Last updated: November 10, 2021
Although a growing number of institutions are engaging with cryptoassets, a larger number are circling the market carefully, or ignoring it altogether. One product that has been proposed as a gateway to crypto markets are non-deliverable forwards (NDFs), which are seen by many as easy for banks to price and risk manage, whilst fitting within the existing compliance and regulatory frameworks of both banks and buy side.
24Exchange has announced plans for a crypto NDF trading platform, and is expected to be followed by other trading technology providers currently in the FX world.
Against this backdrop, crypto trading firm B2C2 has executed a crypto NDF trade with Singapore’s QCP Capital, the culmination, the firm says, of many months work that “paves the way for traditional financial institutions to enter the burgeoning cryptocurrency market”.
The trade, which had a maturity of 19 November 2021, had a bitcoin underlying and was denominated in dollars. The reference rate used was the CME CF Bitcoin Reference Rate (BRR), which is managed by CF Benchmarks, a UK FCA regulated benchmark administrator that licenses to CME amongst others.
B2C2 points out that crypto NDFs are “keenly awaited” by financial market and crypto native institutions alike, as they provide synthetic exposure to cryptocurrencies through a standardised instrument that is widely traded in the FX market, without the need to take physical delivery.
“QCP views NDFs as a gateway to crypto markets for traditional financial institutions, such as investment banks, that are currently unable to handle the underlying assets,” says Darius Sit, co-founder of QCP Capital. “We are delighted to participate in this innovative product alongside B2C2, opening up a new crypto derivatives market.”
Phil Gillespie, co-CEO of B2C2, adds, “Crypto NDFs have been long-awaited by institutions seeking an ‘on-ramp’ instrument they are familiar with, and we’re proud to have executed our first NDF. We believe this new crypto derivative marks a watershed moment in bitcoin’s journey from the corners of the internet to acceptance by mainstream financial institutions.”
With a multi-dealer platform preparing for launch and an undoubted appetite for crypto NDFs, the bilateral trade executed by B2C2 and QCP Capital could signal the start of the next phase of institutional growth in crypto. With NDFs now joining, options, which B2C2 started supporting as a market maker in October, the product suite in cryptocurrencies is starting to very much reflect that in traditional FX. The chances are the convergence between the two will continue apace.