Bitcoin brokerage Crypto Facilities announced the launch of a bitcoin derivatives trading platform found at cryptofacilities.com. The Bitcoin firm that is based in London is run by a former Goldman Sachs director, Dr. Timo Schlaefer.
In the announcement, the Crypto Facilities said that they would begin trading in Bitcoin derivatives with a forward contract on the dollar price of Bitcoin. A forward contract is much the same as a futures contract, save for the manner in which they are traded. A futures contract is traded on an exchange, and they, therefore, come standardized. Forward contracts are traded through private arrangement between two parties. The terms of a forward contract also tend to be much more fluid and flexible.
However in the case of an asset whose price is volatile, forward contracts become more preferable as they enable investors to hedge against price volatility and profit from an appreciating asset in this case Bitcoin. Crypto Facilities has developed a platform that does risk management, marginalizing and settlement in a way that caters to Bitcoin’s infamous volatility. Jean-Christophe Laruelle, COO and co-founder of the company says,
“Our Forward is probably the simplest and most effective tool out there to protect yourself against bitcoin volatility. If you want to lock in the value of one bitcoin, you sell one Forward – that’s it. At the same time our market is extremely robust and secure. There is no central counterparty and all portfolios are marked to our proprietary bitcoin price indices.”
Currently the exchange pair available is with the US dollar. However, Dr. Timo Schlaefer, CEO and co-founder of Crypto Facilities told this writer that they would be willing to add more currencies and derivatives to the platform, but they would only do so in response to actual demand and ability to satisfy that demand on their part.
The Crypto Facilities platform targets experienced investors and prides itself on the team that it has assembled to be able to handle such type of sophisticated investors. According to information available on the company website, company officials have wide-ranging experience in Europe and America, with some of them having worked for companies such as Morgan Stanley, BNP Paribas and the Dow Jones. Dr. Schlaefer believes that their composite expertise would bring professionalism and reliability in the Bitcoin space, something that is currently lacking. He adds,
“We apply the same standards in terms of risk management, compliance, and reporting as you would see in the traditional finance space.“
The firm has also taken extra measures to secure clients’ digital assets. This writer pressed Dr. Schlaefer on the measures taken to protect client assets, in view of Bitcoin’s unregulated status under the UK’s Financial Markets Act 2000. Here is what he had to say,
“Clients trading the bitcoin Forward are protected by the margin that we collect from parties in each trade. Our margin requirements are very conservative and have been specified by our financial engineers who have risk management experience from the traditional finance space. The margin we collect is stored on offline, encrypted servers so a breach of our online infrastructure cannot result in a theft of these funds. We also review all withdrawals manually to verify that they are legitimate. This setup is very safe but still requires our clients to trust us that we do this right, and we work very hard to assure that we do.”
Crypto Facilities was founded by Jean-Christophe Laruelle and Timo Schlaefer, both highly experienced professionals in finance. Mr. Laruelle has worked as a Senior Trading Architecture Designer for BNP Paribas while Dr. Schlaefer worked at Goldman Sachs as an Executive Director in Credit Quantitative Modeling.
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