Building a diligent digital asset offering - an institutional take on Crypto

16 Dec 2021, 23:20

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Although the FCA prohibits the sale of cryptocurrency investments to retail investors in the UK, as the asset class continues to gain acceptance, institutions are facing up to the reality that this now needs to be part of their product offering. Retail investors from outside the UK and institutional counterparties globally are all seeking access to these new digital assets, but just how easy is it to provide liquidity in this space? As CMC Markets continues to expand its institutional offering via its new CMC Markets Connect brand, in the first of this two-part series, quantitative trader, Scott Scrase, explains more about the processes the company has undertaken so far and what has helped shape the digital assets it prices today.

Q: When did you start offering digital assets and how many coins are offered by CMC?

A: It was early in 2018 that we made our debut in terms of offering cryptocurrencies, firstly to our professional traders, before making the instruments available to our institutional counterparties. Initially, the product set was limited to Bitcoin and Ethereum, but over the last three and a half years we have been steadily expanding that out and now offer a total of 15 crypto assets, along with three CMC created crypto indices for those seeking more diversified exposure.

Q: That seems like a relatively limited offering – why?

A: As a London-listed and tier-one regulated business, we have some very rigorous due diligence processes we need to conduct before agreeing to work with counterparties. There’ s no shortage of risk in the cryptocurrency space and with underlying valuations often moving quickly, we need to be assured that our custody and hedging partners are always capable of meeting the high standards that all our stakeholders demand of us as a company. Our preference is to offer a more defined instrument set but ensure clients can trade with us confidently at all times.

Q: Are you looking to grow the instrument set?

A: We certainly are and have in recent weeks added a range of coins including Solana and Polygon to the tradable universe. That was in order to meet the evolving client demand, but as noted above the constraint for us is always finding the suitable, high-quality participants we need to rely on to ensure any instrument added is done so in such a way that will never compromise a client’s confidence in the entire CMC Markets offering.

This remains a fast-moving market and one which will inevitably continue to see innovation from coin founders, lawmakers and regulators alike. It’s also truly pioneering work which is arguably unlike anything we have seen in a lifetime and it could equally result in a wholesale fundamental reshaping of financial markets. No surprise then that so many institutions want to be able to get some exposure to digital assets – and do so in a competent way by the disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination. adding with highly respected counterparties.

 

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