CoinShares and Komainu Join Forces with OKX in Derivatives Trading

Wednesday, 15/11/2023 | 10:38 GMT by Tareq Sikder

The collaboration is to create a legal agreement to be adopted across multiple counterparties.

CoinShares stresses the need for secure settlements in derivatives trading.

OKX has expanded its partnership with the asset manager CoinShares and the custody joint venture Komainu to offer derivatives trading with a feature that mitigates counterparty risk associated with assets held on the exchange.

Navigating Off-Exchange Complexities

The initiative aims at securing trading practices within the cryptocurrency space, particularly in light of the significant events surrounding FTX last year. In response, several industry players have sought ways to facilitate off-exchange trading and settlements within the confines of custody setups.

Lewis Fellas, Head of Hedge Fund Solutions at CoinShares, Source: LinkedIn

While off-exchange settlement is relatively straightforward for spot markets, derivatives trading introduces additional complexities. Lewis Fellas, the Head of Hedge Fund Solutions at CoinShares, emphasized the significance of providing a similar secure arrangement for derivatives.

He explained: "We've taken a collateral mirroring agreement and embedded that so we can trade the full suite of OKX products in the derivatives platform. This is a lot more complicated because you've got margin financing, you have to deal with risk mitigation on the downside."

Sebastian Widmann, Head of Strategy, Komainu — Sebastian Widmann, Head of Strategy,Komainu, Source: LinkedIn

The collaboration between OKX, CoinShares, and Komainu involves the development of a standardized legal agreement, facilitating its adoption by multiple counterparties. Sebastian Widmann, the Head of Strategy at Komainu, highlighted the effort to establish standards in the marketplace as more institutional players enter the cryptocurrency space.

"We are trying to bring standards into the marketplace as more firms enter, especially institutional players who are accustomed to having custody and exchange segregated," Widmann emphasized having a solid framework in the marketplace.

OKX's Financial Report: $11.2 Billion in Cryptocurrency Holdings

In September, OKX released its eleventh consecutive monthly Proof of Reserves (PoR) report, revealing holdings of $11.2 billion in assets like Bitcoin (BTC), Ethereum (ETH), and Tether (USDT), Finance Magnates reported. The report covers 22 digital assets, maintaining a reserve ratio exceeding 100% for 11 months.

Notably, BTC, ETH, and USDT have current reserve ratios of 102%, 103%, and 102%, respectively. The reserves increased by $800 million since August but slightly decreased compared to July. OKX, lauded as the "gold standard" by an industry expert, Nic Carter, who aims to enhance transparency in the cryptocurrency sector through regular PoR reports.