Huobi Derivative Market (DM) has announced instant settlement for its BTC derivatives contracts. The move, a first for the crypto derivatives sector, will enable traders to withdraw coins immediately after closing a position.
Users of Huobi DM will be able to gain instant access to funds, minus floating losses and frozen margin, freeing up liquidity and putting an end to lengthy waiting periods that are the industry norm.
Announcing the instant settlement news, Huobi Global CEO Livio Weng ventured: “The digital asset space is becoming increasingly mature and sophisticated and it’s possible to do things now that were only a fantasy a few short years ago. Users are increasingly demanding tools to respond and engage with this new reality.”
Crypto derivatives platforms have traditionally offered daily or weekly settlement, with the delay in disbursing funds attributed to completing security checks, preventing fraud, and overseeing clawbacks.
A clawback occurs when there is insufficient reserves in the insurance fund that derivatives exchanges provide to cover losses from unfilled liquidation orders. In the past, exchanges have been forced to socialize losses through clawing back a portion of the weekly settlement from the gains of profitable traders.
Through imposing strict risk control procedures, coupled with a 1,042 BTC insurance fund bolstered by a 20,000 BTC safety fund shared jointly with the main Huobi exchange, HBDM is now able to fulfill real-time settlement.
Initially, Huobi DM’s real-time settlement will only be available for BTC, but the derivatives exchange has indicated that it is considering extending the option to other markets.
In addition to Bitcoin, the platform currently offers weekly, bi-weekly, and quarterly contracts for Bitcoin Cash (BCH), Ethereum (ETH), EOS (EOS), Litecoin (LTC), Ripple (XRP), Tron (TRX), and Bitcoin SV (BSV).
The latter market went live on August 16, with a week-long $50,000 BSV airdrop helping to incentivize trading.
Huobi DM has seen robust growth since launching in December 2018, with over $690 billion in cumulative trading volume.
Today, it ranks among the top three derivatives exchanges for volume, and with the release of its real-time settlement option has another way to differentiate itself from the competition.
BitMEX, in comparison, only processes withdrawals once a day, leaving traders waiting impatiently to gain access to funds they wish to divert elsewhere.
Up until now, HBDM had provided weekly settlement on a Friday, but with its new real-time provision, traders can access funds as and when they need them, without the fear of their realized profits being subject to clawbacks or delays.
Competition between exchanges for the derivatives market has heated up in 2019, with a number of traditional crypto exchanges launching their own margin trading products, and a slew of new platforms launching, each hoping for a piece of the pie.
With monthly trading volume of close to $180 billion for July, off the back of 467% growth in volume of Q2, Huobi DM appears well placed to capture more of the lucrative derivatives trade.
Disclaimer: This is a contributed article and should not be taken as investment advice