Startup EverMarkets Aims to Shake Up Futures Trading With Blockchain

Mar 21, 2018 at 19:05 UTC
Updated Mar 21, 2018 at 21:45 UTC
NEWS

Blockchain startup EverMarkets wants to take away Wall Street’s edge in the crypto futures trading market.

The company announced today that it is building a blockchain-based trading platform that will aim to support the peer-to-peer trading of futures contracts on both “real-world” and crypto assets. It will also allow users to utilize cryptocurrency to post collateral, pay fees and settle contracts.

“It’s akin to what bitcoin has done, peer-to-peer transfer of funds,” EverMarkets CEO and Co-founder Jim Bai told CoinDesk in an interview, adding:

“We’re trying to create a market where we can disintermediate some of these centralized players and allow for a peer-to-peer trading of futures.”

Major financial markets companies CME Group and Cboe Global Markets initiated bitcoin futures trading in December of 2017.

But unlike these traditional platforms, which according to Bai reward speedy trading, the EverMarkets Exchange (EMX) will operate an auction system that will collect all buy and sell offers, then match them according to price and size within several minutes.

In this way, the system is intended to level the playing field between regular traders and high-frequency traders employed by hedge funds.

Likewise, Bai claims it could also reduce volatility in the marketplace and create a more equitable means of price discovery.

The platform’s design has earned the EverMarkets team comparisons to the protagonists of Michael Lewis’ 2014 book “Flash Boys.”

Lewis examined high-frequency trading in the U.S. equity market and told the story of trader Brad Katsuyama’s Investor’s Exchange (IEX) – also intended to create fairer trading, but with stocks rather than futures contracts.

Bai, a former futures/options trader for Citigroup and Graham Capital, agreed that there are similarities between EverMarkets and IEX.

“We’ve gained a lot of inspiration from what they’ve done at IEX – and they are also trying to disincentivize speed in the marketplace.”

Traders of the EMX platform will carry out transactions with ERC-20 tokens that can also be withdrawn into a private wallet, avoiding “lengthy approvals or a prolonged waiting period,” and can also act as collateral.

Bai told CoinDesk that company hopes to work with the Commodity Futures Trading Commission to become a licensed exchange, and that it plans to primarily court institutional clients in addition to crypto traders.

More broadly, the EverMarkets founders envision their exchange as contributing to the maturation of the crypto industry. Bai commented,

“This will really help legitimize the use case for crypto, so people can buy it not just for a store of value, but they can actually use it and put it to work.”

The company also announced on Wednesday that traders will soon be able to test the platform in a pilot that’s set to take place within the next several months.

Bai estimated that the public version of the platform would be released during the second half of 2018.

The founders also include Mark Pimentel, the president and a former quant trader and market-maker at Citadel and Knight Capital, and Craig Austin, chief technology officer and a former head of asset allocation research engineering at AQ.

Trading contracts image via Shutterstock

This article has been amended to clarify a quote.