QCP Capital and SBI Alpha Trading, two companies based in Singapore and Japan respectively, have successfully executed a crypto options trade without involving a clearing house. This is the first such transaction in the digital asset industry. The trade was conducted on Clear Market, a U.K.-based regulated electronic marketplace, and used Bitcoin (BTC) as collateral. Zodia Custody acted as a custodian for the collateral, while Corda Network, developed by R3, was used for risk management.
The trade was structured in a way that ensured the assets held in custody were kept separate from the custodian’s assets. This was done to protect the collateral in the event of the custodian going bankrupt. Additionally, the trading parties implemented a feature that allowed for real-time bolstering of collateral through periodic payments on the blockchain. This was done to reduce counterparty risk in the absence of a clearing house.
This method of managing counterparty credit exposure, derived from traditional financial markets practices, eliminates significant risks taken by counterparties of FTX and other crypto trading units that have collapsed, said the press release. This reduces the cost of moving the collateral and enables increased frequency of variation margin payments, reducing the time between price changes and lowering the credit risk.