QFEX aims to bring its proprietary, innovative exchange and risk infrastructure design to allow capital-efficient trading of futures even when the underlier is closed.In the long-term, QFEX aims to replace the entire $100bn exchange, clearing and brokerage industry, with an ambition to be the trading exchange of choice for global banks, institutions and hedge funds, offering 24/7 access to a deep liquidity pool on a huge range of assets.
Modern market structure is still led by CME and the CEA in the US, which ultimately optimized for midwestern farmers. These farmers want expiries and don’t care about leverage so much. The vast majority of futures volume now is done by speculators and institutions seeking efficiency. The products that have to cater to them and comply with the CFTC’s idea of a fair market - like ES or GC - are missing the point. People don’t want expiry, they want leverage, they want instant settlements, they want 24/7 access.
What are the biggest architectural constraints in the traditional model?
Intermediation. Traditional exchanges developed in a haphazard way, when the physical nature of brokers (pit traders), clearers (accountants) and exchanges (a physical pit) were totally different. Now, they are all software, and therefore capable of integration. Intermediation prevents true capital efficiency, adds cost and makes 24/7 operation extremely difficult.
What are perpetuals and why are they different to futures?
Perps were made popular by Bitmex, but are not necessarily anything to do with crypto. If you forget about calendar futures, perps are the natural way to facilitate trading with leverage. If you want to compare them to expiring futures, imagine an 8-hourly future that rolls without any cost. Why would you have a future expiring anyway? The answer is if the expiry corresponds to something - like the harvest of a crop, or arrival time of an oil tanker. This use cases is now a miniscule fraction of futures trading volume.
QFEX removes the broker from trading – brokers can increase costs for investors (by widening the spread), and manipulate the market, like by hunting for your stop losses. With QFEX, traders and investors can become the broker, able to set prices themselves and not rely on a market-maker.
How do you incorporate dividends and other corporate actions?
We have a calendar of all corporate actions that are expected to result in large price moves. Other than that, it’s a balance. If there truly is a big move in the underlier, the market is open to ‘gapping’ risk as people have to be liquidated faster than the market may allow. Models are calibrated on historical moves, with the ability to adjust band widths with discretion. Dividends etc are handled much in the same way they are handled in crypto perps (eg, dividends are just handled by market makers), as all of these things have an analog in the crypto world (eg airdrops, hard forks etc).
LULD is a hacky way to slow down disorderly trading in equities, we follow the ‘futures paradigm’ of price limits at a fixed width around the last known underlier price. If the underlying equities hit a volatility stop, we will still allow trading around the last known price before the stop, but the funding will be ‘marked’ to that last price, so people will have to pay funding in order to trade away from this price.
Tokenized equities and equity perps can exist side-by-side as they serve different use cases, as in all spot and derivatives markets (trading/ hedging vs long-term investing). The incremental value add of tokenizing equities vs holding the equities themselves is very low, and offset by blockchain security issues. If you want to buy and hold TSLA for 5 years, do you want to trust whatever chain is flavour of the cycle to hold that on? Do you trust the tokenizer? Do you need 24/7 - can’t you just wait a day?
We KYC all users before they are allowed to trade on the platform.
We made this decision after careful consideration of the implications on safety and liquidity were we not to do so.
KYC stops almost all attack vectors that no-KYC exchanges suffer by greatly reducing the ability of bad actors to create new accounts.
It also enables the full spectrum of liquidity providers to trade on the platform.
Due to legal and regulatory reasons in certain major jurisdictions, we currently ban the onboarding of new users from many countries and locations, including but not limited to the following:
