What is being called by the firm as one of their most requested features, New York-based Bitcoin exchange, Coinsetter, announced that they have begun to offer margin trading for select business customers and market makers. The offering is based on the integration of post-trade settlement of trades to instantly measure balances and allow for margin trading.
According to Coinsetter, the margin trading provides an opportunity for well capitalized business customers to mitigate deposit risks associated with holding funds at Bitcoin exchanges which historically have had security breaches, most recently affecting Bitstamp. With margin trading, firms such as Bitcoin payment processors who actively transact on Coinsetter will be able to hold bitcoin values up to five times the size of their balances, providing additional flexibility in sourcing positions when hedging their internal transaction risk.
Commenting to Forex Magnates, Jaron Lukasiewicz, CEO of Coinsetter, explained that requirements to be included for the new program were that “clients must be a business entity with a compliance-verified account.” In terms of third party partnering with other firms to provide cross-platform settlement, Lukasiewicz answered that they weren’t currently using external sources for providing settlement, but “are in early stage discussion with US prime brokers that we hope to be able to add to the program this year.”
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Short Positions for Market Makers
In addition to the margin and settlement program for business customers, Coinsetter is simultaneously allowing market makers to short bitcoin on the exchange. The integration of short positions expands Coinsetter’s features to appeal to market makers. Last year, the exchange launched an incentive program to market makers that would reward them with equity based on the liquidity they help get transacted on the exchanges. In addition, last year the trading platform became FIX 4.4 API compliant to allow it to conform to financial industry standards used by high-frequency traders and market maker trading platforms.
Commenting on today’s news in their public remarks, Lukasiewicz, stated, “We have been testing a post-trade settlement offering with select business customers since December, and its value is apparent. Coinsetter’s business customers, many of whom represent important institutions in the bitcoin space, can now access liquidity without having to worry about bitcoins being hacked or USD holdings becoming tied up. The program also helps growing companies reduce their working capital burdens.”