Dutch ‘Speed Trader’ Jumps in Cryptocurrencies
The EU’s largest trader of ETFs has moved into cryptocurrencies, ignoring regulator’s cautioning consumers and institutions not to buy or sell digital currencies.
The Amsterdam-based speed trader Flow Traders NV is making markets in the 1st exchange-traded notes based on Bitcoin and Ether.
XBT Provider, an issuer of crypto ETNs listed in Sweden, said that the Dutch company has “dramatically increased” trading of its securities in the last few months.
There a 5 US speed traders are making markets in cryptocurrency futures or the underlying currencies,
But, Flow Traders is the 1st firm anywhere to disclose it’s buying and selling crypto notes listed on regulated stock exchanges.
Publicly traded notes or funds would broaden the appeal of virtual money as an asset class by providing a straightforward and cheaper way of investing in the likes of Bitcoin and Ether.
People underestimate cryptocurrencies. It is big, and the market participants are much more professional than people think. Institutional investors are interested.
The enthusiasm from Flow Traders’ investors is not being returned by its regulator, the Dutch Authority for the Financial Markets.
“We discourage activities in cryptos both by consumers and professional license holders,” a spokeswoman for the AFM, said in a statement. “By virtue of its newness and the anonymity it potentially offers, it is very prone to abuse. Given its inability to serve the promised purpose as a currency, we don’t regard it to be an asset class.”
The AFM may dislike cryptocurrencies, but there is little it can do to stop any firm from trading regulated securities or derivatives on a regulated exchange.
Flow Traders made its move as a number of banks and investment firms push into the cryptocurrency space.
Goldman Sachs Group Inc. (NYSE:GS) is setting up a digital-asset trading desk, and Barclays Plc (NYSE:BCS) has agreed to provide US banking services for Coinbase Inc., the San Francisco-based exchange.
A speed trader seeks to hedge every trade it makes as quickly as it can. Making markets in cryptocurrencies has forced its traders to find new ways of hedging.
Flow Traders hedges its trades of crypto notes with futures contracts run by CME Group Inc. (NASDAQ:CME) and Cboe Global Markets Inc. (NASDAQ:CBOE)
The Dutch firm traded $284-B of ETFs globally in Q-1 making it the region’s biggest trader of the securities. Cryptocurrencies are particularly attractive because speed traders make the most money in the most volatile markets.
Last month The Bank for International Settlements (BIS), a central bank for other central banks, outlined 3 Key issues:
- Cryptocurrencies are too unstable
- They use too much electricity
- They are vulnerable to manipulation.
The regulators want to see a global agreement to regulate cryptocurrencies.
Yet with the US Securities and Exchange Commission, the UK Financial Conduct Authority and their counterparts in Japan and other major markets each taking their own approaches, policing digital tokens will probably be a patchwork for some time to come, we believe.