December 9, 2023
Welcome to the AD Derivatives podcast led by Director of Derivatives; Greg Magadini. Featuring: Yev Feldman Co-Founder of SwapGlobal!
SwapGlobal provides derivatives – swaps, and options – to US digital asset investors and hedgers, such as hedge funds, family offices, private equity funds, and bitcoin miners. SwapGlobal plans to register as a standalone swap dealer with the CFTC and SEC.
Introduction
In this episode of the Amberdata Derivatives Podcast, Yev Feldman, Co-founder of SwapGlobal, joins the discussion to dive into the intricacies of crypto derivatives trading. SwapGlobal, a venture-backed crypto OTC dealer, aims to simplify institutional investors' access to crypto derivatives trading in a compliant manner.
Yev Feldman's Background
Yev Feldman shares his journey from a traditional banking career in New York to a transformative role in crypto. After a decade in equities trading for major banks like UBS and Bank of America, Yev entered the crypto space, joining BlockFi in 2019. His unique experience in trading against concentrated stock positions paved the way for his transition to handling loans against Bitcoin at BlockFi.
Evolution of Crypto Lending
Yev reflects on the early days of crypto lending, highlighting BlockFi's role as a pioneer in lending dollars against liquid coins like Bitcoin. The shift from traditional banking to crypto presented novel challenges, and Yev emphasized the importance of adapting to the evolving crypto-native balance sheet dynamics.
BFA's Business Model
The conversation touches on Yev's experience at BFA, where he dealt with loans on concentrated stock positions, especially in cases like private equity firms holding recently IPO'ed companies. Yev explains the considerations in lending against illiquid positions and the correlation between liquidity and the probability of a significant price event.
BlockFi and the Crypto Lending Landscape
Yev discusses his move to BlockFi and the company's focus on lending dollars against Bitcoin. He highlights the unconventional strategy of encouraging users to send coins randomly, a tactic that proved successful. The discussion turns to the challenges faced by crypto players in building back-office operations, especially for derivatives.
Introduction to SwapGlobal
SwapGlobal's mission is to facilitate seamless trading of crypto derivatives for institutional investors, primarily in the U.S. The platform aims to simplify the OTC derivatives trading process by providing an electronic platform for trading options with automated confirmations and regulatory compliance.
OTC Derivatives Trading
Yev explains that SwapGlobal looks for the other side of a trade first; if not found, they hedge the position immediately. The platform utilizes an offshore trading team to access more liquidity globally, allowing them to offer competitive pricing. The focus is on making OTC derivatives trading as simple as possible for institutional clients.
Challenges in Altcoin Derivatives
The conversation shifts to the challenges of trading altcoin derivatives. Yev acknowledges the demand but emphasizes the need for careful pricing due to the illiquidity and lack of market depth in many altcoins. The discussion touches on the considerations in providing options for altcoins without compromising risk management.
SwapGlobal's Roadmap
SwapGlobal's current offerings include outright calls and puts for Bitcoin and Ethereum. The roadmap includes adding package options and providing users the ability to build and trade custom strategies seamlessly. Future plans also involve expanding to more linear instruments to cater to a broader range of clients.
Compliance and Custody
Yev clarifies that users need to be Eligible Contract Participants (ECPs), meeting specific criteria based on assets or equity. While SwapGlobal does not custody assets, collateral is re-hypothecated with risk management considerations. The platform aims to offer a comfortable and defined risk-reward structure for clients.
Future Developments
Looking ahead, SwapGlobal plans to enhance its technology for scalability, making it accessible to a growing market. The goal is to provide reliable and efficient services as the industry evolves, especially with the increasing interest from hedge funds and institutional investors.
Personal Insights and Recommendations
Yev shares his interests outside of work, including a passion for learning languages, with recent endeavors in Hebrew and Spanish. As for book recommendations, he suggests "The Zurich Axioms," a valuable resource for understanding human behavior in trading during past market cycles.
Conclusion
The episode concludes with insights into SwapGlobal's commitment to providing a user-friendly platform for OTC derivatives trading, staying ahead of industry developments, and contributing to the evolving landscape of crypto finance.
