AD Derivs. Podcast (Ep. 74) - Greg Guttas, Head of OTC, and Simon Nursey, Head of Derivs @Flowdesk

Speaker A: Hi everyone, and welcome to the Amber Data Derivatives Podcast. I'm here with Greg Gudas and Simon Nursey of Flodesk. Uh, guys, how are you?

Speaker B: I'm great. Thanks for having us, Greg.

Speaker A: Absolutely, absolutely. So, Greg, you are the head of otc, uh, at Flodesk, and Simon, you are the head of derivatives over at Flodesk. Um, before we jump into everything Flodesk and what you guys are doing over there, you guys have both really extensive backgrounds in tradfi and finance in general, including crypto. Uh, I kind of like to jump in there. Maybe Greg, we could start with you. You had a pretty big career, uh, in the ETF space doing like redemptions and creations and everything of that nature. Maybe you could give us a quick rundown of what that looks like and what that means.

Speaker B: Yeah, sure. Um, so I spent the majority of my early career at Credit Suisse. Uh, I worked for an equity desk, which uh, was called the program trading or portfolio trading, depending on which firm you were at. And effectively what that meant is we were trading the underly buying portfolios of ETFs, so not the ETF itself always, but um, we were either rebalancing the portfolios that uh, these ETFs held or we were doing, as you noticed, as you noted, the creation redemptions for these ETFs, high level. What that means is, um, an ETF is simply a wrapper for a basket of stocks, if we're talking about like SPY or QQQ or any of the main equity ETFs you've heard of. And so when an ETF gets um, an inflow or when someone wants to buy that etf, that fund needs to then go and source all of the stocks within that portfolio in order to not dilute the rest of the, um, the rest of the shareholders. And so that's typically done through a desk like ours at Credit Suisse. Um, that process obviously goes to more than just the equities. It came to the crypto world as well. Um, and so when the, when the Bitcoin and the Ethereum ETFs launched, we ran a pretty similar process, um, that Flodesk was a part of where, um, when investors would go and buy IBIT or GBTC or any of the other crypto ETFs, what that would require is, that would require the ETF issuers to go out and buy the Bitcoin or the Ethereum, um, to hold in the portfolio to reflect that investor's share of Bitcoin, uh, or Ethereum and So that also is um, often done through a desk like Flodesk. Um, and so it's sort of uh, a merging of two worlds for me.

Speaker A: Yeah, that's really interesting. I mean that makes a lot of sense to me, especially at an end of day basis. But stocks trade in milliseconds. What happens if someone just comes and buys a ton of Nvidia? And theoretically the spy ETF hasn't uh, reacted alongside it yet. Is there some sort of divergence that can happen between the underlying portfolio and the ETF value?

Speaker B: You can, it's typically very fast. As you mentioned, um, you know these, the firms that are trading and market making these ETFs are obviously highly technical, um, firms and they are reacting within milliseconds as you just noticed. So typically any dispersion between the underlying portfolio and the ETF trading in the secondary market on, you know, 99.9% of the time is going to be uh, such a short period of time that you would never, you would never notice it with, with the naked eye. It takes a pretty crazy event for um, for those prices to deviate. And so you know, when you're talking about something like Covid or you're talking about a new event like all of the, the crypto ETFs launching at the same time, that's sort of the type of event it would take to have the ETF itself and its price on the secondary market really deviate from the underlying of those ETFs.

Speaker A: And then what about something like IBIT, where you're basically trading an equity ETF, but you can't necessarily uh, buy Bitcoin in the equity space to mimic the etf. So what's the discrepancy there? If you have to go on chain to go buy Bitcoin and then how does that all work?

Speaker B: Yeah, so typically what will happen here is an ETF market maker, right? There's a number of them in the space that are pretty, um, recognized names. You could be Jane Street, Citadel, Susquehanna are some of the main ones. Um, typically they're making two sided markets in these ETFs and so they'll be willing to buy it from you at a price and they'll be willing to sell it to you at a price. What typically will happen is if you come in and you want to buy $10 million of IBIT, somebody like Jane street will make you a market in that $10 million block of IBIT. They'll sell it to you even though they don't currently have it today. What they will then do is they will actually go buy $10 million of Bitcoin and, and they'll usually do that, um, through either bitcoin spot itself and they'll buy it on an exchange like Coinbase or on Binance or wherever they're comfortable trading, or they'll buy a bitcoin derivative. Right. That could be a CME future, that could be a perpetual future if they're trading on offshore exchanges. And so that basically allows them to have sold an ETF that they don't have. And they've covered their risk of shorting that ETF by buying a product that will react in an identical way. So no matter what happens with the price of bitcoin after that trade is done, they're perfectly hedged. At the end of the day, what they would go, that goes into the creation redemption mechanism that you mentioned. At the end of the day they will go to Blackrock and they'll say, Hey, I need to create $10 million of IBIT. And um, IBIT will go out and they will source that $10 million of Bitcoin themselves. Now how this typically works and this kind of goes to, there was a lot of talk about the in kind creations versus the cash creations early on when these things were trading. The way it would typically work is Jane street having already bought the bitcoin, they would just give that bitcoin directly to BlackRock. BlackRock would then give them newly minted ETF shares and everyone walks away happy. When there's a cash creation process, it becomes a little muckier where blackrock has to go out and buy the bitcoin and then whoever that market maker was would have to sell the bitcoin they bought at the same time. And there would be some level of slippage there when they do that. But ultimately, um, it's sort of the same end game with a little bit more of an operational hurdle to make it happen for the low cost, um, transactions that we all come to expect, um, in the trading world. So, um, that's sort of the mechanics for how the Bitcoin will end up. Starting with an investor coming to buy an ETF until the Bitcoin actually makes it into the BlackRock Trust that holds the Bitcoin for the duration.

Speaker A: Yeah, okay, that's very interesting. I got a couple more quick ETF questions and we'll jump to the volume side of things. But um, yeah, speaking of volume, there was these volume ETFs that are back now, but I remember trading in February 2018 aka volume when a lot of these inverse volume ETFs like XIV ended up blowing up and going straight to zero, um, kind of what happened there? Why did an ETF drop from $70 a share to overnight to $0 a share essentially in the morning when the market opened again?

Speaker B: Do you want to take this one seven.

Speaker C: Yeah, perhaps I'll take that one. Um, yeah, I mean uh, I was trading FX at the time but uh, we were watching this one closely because it had been flagged out there. Um, I think Zero Hedge brought it up quite early. Um, um, it was quite a badly designed product in that uh, the sizes were just exploding um, and uh, had gone way beyond the uh, liquidity of the market. And we also had a very. You could calculate exactly where the stop loss was for this fund and whenever you have a sort of well flagged stop loss that the market can focus on, we inevitably go there. Right. So um, that's what happened in the end. We knew where the trigger on VIX was and everything unwound after that back to zero. But it's exactly the same as we saw whenever there's a line in the sands, whether it's um, bank of England and the erm, uh, uh, or it's ust, uh, uh, where you could monitor uh, exactly uh, how much collateral there was and uh, what was back in it. Uh, so the car crash was there, ready to happen. Uh, well, uh, before we uh, got in the car.

Speaker A: Yeah. That's interesting. And you mentioned that the size of the etf, like I think they were using VIX futures to hedge and the VIX futures market wasn't as liquid as all the assets under management of the inverse etf. Was that part of the problem? I understand that. Right,

Speaker C: that's right. And as false went lower and lower there was convexity which meant that the sizes had to, had to increase and increase. Um, so yeah, so it didn't start out bigger than the market, but it finished bigger than the market market.

Speaker A: Very interesting. And so Simon, kind of jumping into your side of the career. So I mean you spent 17 years Ah, as the head of FX Options over at BNP. That's a pretty OG career right there. Like what does that mean? What does head of uh, FX options do at a big bank like that? What kind of responsibilities uh, do you have?

Speaker C: Well, I didn't start out as head of options. I started out as uh, uh, um, uh, junior geek, uh, on the desk. Uh, I was what you'd call nowadays uh, a deskcon. Uh, and uh, yeah, sort of uh, Went about becoming the uh global heads the uh long way around. So um, took an opportunity, came to Singapore, traded the exotics, then traded structured products, then traded the flow. Uh and each time sort of uh, making a little bit of money and uh being pushed up um chain um Managing uh big bank risk is um. Um or sorry managing a global desk uh of 50 uh odd traders uh is. Is not really about trading. Um the, the the smart guys do the trading. You're, you're too far from the market to be able to do that. Ah um. It's really about managing a uh you know a team of talents and um traders um um uh can be challenging to manage and motivate uh and drive forward and bring together and uh. That was the main part of the job really uh making sure that uh everyone was kind of working towards the same direction. We're managing our overall risk uh and making smart decisions and looking out uh for the pitfalls. Um so the job ultimately was quite far from trading and more about uh just people management and uh communication uh and uh navigating the sort of increasing number of uh rules and regulations and uh capital and balance sheets and all of these technical things.

Speaker A: Yeah, that makes a lot of sense and is a lot of the trading flow mostly facilitating customer needs. Like someone wants to do some exotic trade and you take the other side and price it and all that stuff. Or do some of those traders also look at the volume surface and essentially just make discretionary bets on what they think should happen as opposed to what's being priced right now.

Speaker C: Yeah, all of those things. So the playbook, um my playbook is uh exactly the same as uh what we've built at uh flodesk. Um so you start with a uh desk that's ah servicing client flow. You uh, give them the top service, you um, you try and generate as much flow as possible and then you. And then you use that to um, uh increase your presence in the markets. Uh you provide liquidity to the market as well and put yourself at the center of all of that flow. Uh and then use the information from all of that flow to uh, to take a directional risk yourself and uh, and leverage uh, and leverage all of the information that you're seeing and the liquidity that you have access to. So uh a top performing options desk is one that uh is taking risk. It's servicing clients, making markets, uh seeing the flow and uh, then managing out. Um and if you can sort of put yourself in the middle and see everything you're in a really strong position and very difficult to displace.

Speaker A: Yeah, that's very interesting. The network effects of having a lot of clients gives you a lot of insight on what's actually happening in the market. That's an interesting perspective. And then what kind of clients usually trade FX or FX options? Is it just bank to bank or uh, is there hedge funds? How does that work?

Speaker C: Oh well it depends on the um, institution, um, um bnp, uh Paribas. We had uh, um a lot of global, uh corporates, uh, hedge funds, uh asset managers, uh plus uh, all of the private banks, um uh for your business to be successful you really want to try and balance uh all of the flows and then leverage on that. Um, so uh, for instance a very strong part of our business was um, at uh Stanchas, where we uh, would receive vega, uh from all of the structured products that we were selling into, uh, uh, Asian, uh, uh, small corporates and uh, private banks and then recycle that vega normally uh, in renminbi or yen or yuan and uh, recycle that vega to us um funds that um, uh had a strong appetite for that. So you seat yourself in the middle and then try not to have to um, rely on uh, market liquidity, um uh. And you get in a pretty good place there.

Speaker A: Yeah, that's fantastic. So kind of moving on to flodesk. Um, so obviously you guys do both spot and derivatives. Uh, maybe Greg, if you just want to kick it off. What does FLODESK do and what kind of trades do you guys facilitate and what kind of customers do you guys have and things like that?

Speaker B: Yeah, sure. So um, I guess taking a step back on the FLODESK side, um, FLODESK was founded back in 2020 and the primary business here was actually token market making on both centralized and decentralized exchanges. So the standard model that we operate under is what we call our market making as a service. And essentially what that means is um, token protocols who want to launch a token, they will pay flodesk, usually in the form of a retainer, um to use our market making software, our operational excellence, um, all the infrastructure we have here at flodesk to make sure that their token has liquidity on the exchanges, both centralized and decentralized. So traders and investors can seamlessly trade in and out of their tokens, um, when they want to. So that was sort of how the firm was founded. That business model on the market making side has expanded to um, through exchanges as well where exchanges will pay us to provide liquidity on um, on some of their markets. You know, typically if there are um, altcoin markets that are maybe not as uh, not as much natural two way flow or if they're bootstrapping perps on their exchange, you know there's certain events that might cause uh, an exchange to want to pay a market maker like flodesk to um, basically ensure that there's liquidity uh, in their markets at all time, um, for you know, for, for their, for their traders uh, that are using their platform. With that we started a OTC desk here, um, back in 2023. There were a few of us from Genesis, uh, on the sales and trading and operations side that um, you know when, when Genesis went down, um, we all basically wanted to, to restart the good parts of Genesis which was you know, the trading. There were a lot of good parts of Genesis but our specific uh, area of expertise was, was the OTC trading desk there which was at the time the biggest OTC trading desk um, in the market. And so we came here to do exactly that. Now the services we offer here, we're a full scale OTC desk. Um, it starts with the spot trading that is you know, typically example somebody will come in and say hey I want to buy 50 bitcoin. I will show them a market on 50 bitcoin. Typically it'll be above where the current spot price of Bitcoin is. And if they accept that price, their price is locked in. Uh, it's incumbent on myself and my team to hedge that risk and to make sure that we're sourcing that Bitcoin um, cheaper than where we just sold it to our client. And um, it's sort of a one stop shop for customers to not have to deal with exchanges, to not have to deal with asset movements, um, to and from exchange and to have that counterparty risk. Um, and so, and so that was sort of the foundation of the OTC desk. With that we built out a credit desk which is you know, fairly straightforward. Customers want to lend us assets to earn yields or they want to borrow assets for you know, a number of reasons. It could be borrowing cash to lever up and buy um, and buy more coins. Um, it could be just pure operational cash. It could be borrowing ethereum to short. You know there's a number of reasons, um, folks would use a credit desk um, for their trading or personal needs. Um and then most recently we started our derivatives desk, um, with Simon joining us, um, those are sort of the three main pillars of the OTC desk here.

Speaker A: Yeah, fantastic. There's a couple questions I want to follow up there. So with the market making as a service, a lot of protocols, I'm sure listeners know the way that they've been launching tokens is essentially doing an airdrop. When you're doing market making as a service, um, how do you avoid just kind of getting hosed when the airdrop happens and everyone just sells to market makers essentially? Is that part of the negotiation up front or how, how does that part work?

Speaker B: Yeah, so in, in the market making as a service model, the assets that are used for trading are typically the protocols themselves. And so you know they'll actually provide both the, the coin to be on the offer side and like tether for instance to be on the bid. And so you know, typically they will be the buying source. Um, when there are part of this supply is airdropped onto users, they will typically be there to buy some uh, to basically act as buying pressure to absorb a lot of the airdrop selling. The price will naturally find an equilibrium and then everything will go back to being a little more two way. Um, so that's typically the model for the market making as a service. When you're talking about when FLODESK is market making um, with their own customer, sorry with our own principal funds. You know, we obviously have to be a little bit more careful in terms of the markets we're making. But we'll have, you know, uh, we'll have contractual obligations that we need to be, um, have X amount of depth within, you know 1, 2%, 50 basis points, whatever the, whatever the negotiated terms are. Um, you know we have to meet our obligations obviously from, from our contract. But it definitely is, you know, not the easiest thing when a large amount of the supply is airdropped. Um, it's a total mixed bag though how these TGE events um, perform very much. They depend on the environment at the time of the launch. Um, it depends on what the token is and how much organic uh, user growth there is and do people even know about it. And so it's a total mixed bag. It's a very difficult thing to do. Um, you know it's one of the hardest things I think we do ah as a firm is that initial launch liquidity is very spread out across all these exchanges and we're trying to keep prices in line. Um, and so it's certainly a tall task for us, but it's what they pay us to do.

Speaker A: Yeah, fantastic. And Simon, on the derivative side, um, what kind of markets do you guys offer? Is it just Bitcoin and eth or will you guys make Markets on altcoin volume and things like that as well.

Speaker C: Um, yeah, no, no, we're uh, we're all over the altcoin vols. Um because of the nature of uh, uh token market making we uh, we talk to a lot of foundations, a lot of funds. Um and out of that uh, you know most of the uh, most of the interest is uh out there on the alts. Uh we've got uh, we've got uh, we've put together prices on uh, most options in the, in the top 500. Um. Yeah. And try our best to build surfaces around that which as you know is a bit of a challenge. Um, BTC and ETH is uh, where the big volume stuff uh goes through and uh. So we're uh, providing liquidity around that uh and we uh. Well and this week uh, we plugged into the deribit rfq uh um uh platform so we're providing access there. But probably the more challenging part of our book is uh the.

Speaker A: Yeah and working with the foundations. That makes me kind of think of the story you told me about sort uh, of the Asia FX flow. So I imagine the foundations are suppliers of Vega to you guys and then speculators or funds would be buyers of Vega. Um, if there's like a perfect customer to take the other side right away, that's great. But what do you do if you are just getting supplied uh with Vega or, or short Vega if there's a lot of speculative demand. How do you hedge that out when there's not a altcoin listed market anywhere for you to hedge out with? A direct hedge?

Speaker C: Mhm. Yeah, uh, you're absolutely right. Um, there are um, a lot of similarities between our business uh with supply and demand, uh with the other markets. Um but uh, generally we receive Vega from uh, anyone looking to generate yields on their, their assets and uh, uh then we actively ax that out to customers uh uh that we think might uh, be able to uh, take advantage of uh, cheap volatility uh through spreads, corporate flies, these sorts of structures, uh that allows them to get leverage and exposure to the top side. Um because we've got a um, pretty strong network both on uh the foundations and the huddlers, but also the buy side balance the uh, uh the funds. Uh, it sort of, it creates a uh. Creates a nice balance. Although um, obviously the um, uh it never, it never balances off exactly. And uh, the buyers rarely want what the sellers want to sell and the sellers really want to sell what the buyers want. So uh, we're managing uh, a Big book, book of various longs and shorts and uh, uh hopefully we can sort of manage and balance things out essentially um Ethan btc, uh provide uh good proxies for sort of overall uh crypto volatility and uh, we're active there to sort of uh, try and try and balance the overall book. But there are far from being good uh, hedges. Right. Especially uh, if you look at the price action over the last week where we've seen seen uh, sort of uh BTC and es come to the fore. Whilst uh, whilst a lot of tokens have stored it's um. Yeah uh, makes for quite a challenge. But uh, if you sort of have a big enough and diverse enough book you can sort of uh, get around all of that.

Speaker A: Yeah, that makes a lot of sense I imagine the flows from all the token protocols so you have a bunch of, you're long a bunch of vega from that and then you go to neutralize some market vega by selling some bitcoin and eth and then you have this market rally where bitcoin and eth kind of get some life to them and then the alts don't do anything that's kind of not the best spread uh at the best time. I can see what you mean there.

Speaker C: Yeah but that's where the trading aspect comes in. That's where you need to have a uh, risk taking desk in order to provide liquidity. Um, we're there not to do the trade, not necessarily to do the trades we want to do but to do the trades that our customers want to do and then make sure that goes through at the right price. Um, uh, and then we've got good risk appetite so uh, hopefully everything comes together.

Speaker A: Yeah, fantastic. And obviously we've had a lot of interesting events, volume events so to speak in crypto. The FTX banking crisis or the FTX bankruptcy, the SVB banking crisis, things like that. Um, is there anything in FX that uh, stuck out to you as big stories while you were trading? I'm sure the 1997 FX, uh Asia Financial crisis might have been one. But is there anything that's similar to crypto in terms of those events or is crypto its own beast?

Speaker C: Um, no. We've seen uh, obviously in fx uh uh with a career ah that long you see plenty of crisis and they're the moments that tend to define um your success as a trader. Right. Uh, it's how you manage your way through those and uh, uh manage the liquidity. That's when you're uh, challenged the most. M in My first year of trading we had uh, ltcm, um, which was quite interesting in that here was an enormous hedge fund um, with massive positions and when they went down, um, markets that should have been uncorrelated, Russian debt and dollar yen uh, and Vix, uh, suddenly became massively correlated and uh, everything was moving together and we saw moves that we've never seen before. Uh, the crisis that uh, stands out the most for me, um, is the gfc. Yeah, that. And, and we haven't seen anything uh, like that in crypto to, to the extent that it wasn't just a market crisis. It was uh, it was something much more existential. Um, you know I, I was managing, you know, traders that were dealing with difficult positions but, but also having to question everything that they'd assumed uh before. You know, the um, access to capital, access to borrow, where's the deposit markets, uh, even things like, uh, even things like uh, will the bank be open tomorrow when I try and take money out. It was uh, it was quite a different level of crisis and uh, um, and you know, an interesting one to manage our way through. Yeah, crypto though in what, uh, four years of uh, trading crypto vaults, I think we've uh, we've easily covered 20 years worth of highs and lows and uh, bulls and booms. It's been pretty crazy.

Speaker A: Yeah, absolutely. I uh, remember the great financial crisis. That was definitely a scary time for sure. Um, Greg, on your side with the spotdesk, I imagine some speculative funds or buy side funds might have a really strong opinion on some altcoin that has very little float. Um, they might know the founders, they might know an announcement that's going to come out that who has time to keep track of every token, uh fundamental event. Um, how do you deal with that low float, uh, tokens and getting sort of big buy orders. Obviously there's asymmetric risk when you're short that.

Speaker B: Yeah, for sure. Um, so you're right that that exists. Um, I think in practice, you know, I've been doing this for a number of years and there are very, very, very few scenario situations that I can point to where you know, a client of ours actually used some level of information that um, you know that, that asymmetric information that you're, that you're kind of referring to where they've actually used that um, directly against me or my team. Um, you know a more the way that would in theory happen was they would ask me for a risk market on, on a coin that they knew was going to move one way or the other based on some piece of information that's going to come out. And you're exactly right. Right. Like there's Hundreds, we trade 500 plus coins on the desk. Like there is no way for us to keep track of every coin that we're trading and, and have an opinion on, you know, where it's going to move. And so we have opinions on where the market said early we'll move, but on a coin by coin basis we just can't, we can't manage that at all. And so we might be trading against a fund that has 12 positions and they know all of these positions intimately and we only, you know, know them from a, you know, it's a, it's a ticker and we generally have a market view. So uh, there's certainly an information asymmetry there. Um, in practice, you know, we have good relationships with our clients and they typically won't stuff us with, uh, with the position that we wouldn't know about, for, for those reasons. Um, and so they can sort of, they can sort of shift the execution strategy like, hey, can you help me sell, you know, x million dollars of this token? Or hey, I'd like to buy this token. Um, and then we can sort of, um, we can buy it for them and sort of pass through the price. And so, you know, we're not going to get, we're not going to get stuffed in that manner. And so there are ways to get around that where if someone wants to get into a position urgently or get out of a position urgently, you know, without, without stuffing us with that position, we can certainly make that happen. Um, you know, obviously it has happened to me and it's no fun and I'll, you know, I'll make a market and three minutes later it's 15 in my face and I'm like, what the hell just happened here? Um, so it does happen from time to time, but it's, it's pretty rare at this point.

Speaker A: Yeah. Okay, that, that's good to know. And, and maybe this happens more on the convexity side, Simon. But, but do you ever have a customer? I mean, counterparty risk is a big risk with over the counter markets. Do you ever have a customer who's on the other side of a pretty big losing trade? Maybe they sold a bunch of risky, uh, tail options that blew up in their face and they try to back out of the trade. Does anything ever like that ever happen?

Speaker C: Um, uh, well, yeah. Have we had customers that have been in difficult positions and uh, struggling to manage Their risk. Yes. Ah, yes, of course. Um, back out of trades. No, uh, we trade, I mean all of our OTC trades are done under um, um, strong uh, Easter CSA agreements. We set collateral aside. Um, credit is something that's always um, in the front of our minds when we trade it in the OTC markets. Uh, so we manage that very carefully. Um, and um, one thing that I'd sort of add to what Greg was saying about sort of relationships, um, OTC is a very relationship, uh, driven market. Right. Um, we build relationships over time with our customers. Um, and with that comes trust. So we understand where they're coming from, how they deal, how they behave, uh, and vice versa. Um, so that's kind of the big difference between that and say the listed market where you trade in anonymously and uh, you can probably assume that uh, the other party uh, has more information than you. Um, uh, but in OTC it's much more professional, much more institutional. Uh, and uh, it's too small a market for people to be uh, systematically recognizable. Otherwise saying that um, the safest way to um, trade in crypto is really to come with a little bit of um, um. What's the word? Um, deference. Uh, and always sort of uh, assume that the other party's got more information, uh, and then scale your risk appropriately. There's no room for no one, uh, with a massive trading ego. Lasts for long in this sort of market.

Speaker A: Yeah, makes sense. So, uh, we just had the announcement that Coinbase is buying Deribit. Uh, so that's kind of an interesting development for the crypto volume space. Obviously the crypto volume space is still pretty small. Um, do you guys have any opinions on that? Do you guys think that's a good thing, a bad thing? Indifferent maybe? Simon, I'll start with you.

Speaker C: No, no, I think it's a great thing. Right. Um, I've been a long time fan of Deribit. They've got a uh, um, they're a really solid team and they've got a really solid platform. We connect into a lot of different exchanges out there and uh, it's obvious that uh, Deribit has got some of the strongest infra and uh, uh, best designed uh, exchanges out there and they've got a dominant position uh, in crypto options. So uh, I honestly think Coinbase, uh, has got themselves a bit of a bargain there. But it's also, it's also very good for Deribit, uh, and very good for the uh, the market to have uh, a much bigger capital backing balance sheet behind The Exchange, this can only be good for our market because it'll bring in more institutional accounts, uh, more confidence. Um, it's, it'll just be a better, stronger clearing. Clearing platform. Um, yeah. So, uh, so crypto options have sort of long underperformed, uh, the linear part of the market in terms of size. I think this would be, uh, the push that allows us to scale up properly.

Speaker A: Yeah. Fantastic. Greg, do you have any, uh, thoughts or opinions on it?

Speaker B: Yeah, well, I think to add to what Simon said, which I agree with, all of it, um, I think it's also a pretty notable shift, uh, in the US regulatory scene that's, that's becoming evident right now. And this is a headline that you could have never expected to see a year ago. Um, and so I, I think it's notable in terms of just the overall acceptance of crypto trading within the U.S. you know, the question is ultimately going to be, you know, how much, you know, if, if these, if Deribit is allowed in the us, how much, how much traction will it get here? Right. Like, we already have CME options, we already have IBIT options. So had this been done two years ago, um, I think it probably would have had a much bigger impact on Deribit's overall volumes, um, than it will today. Just because I think that there are a lot of traders who already have options that are perfectly good, um, for trading Bitcoin and ETH options, uh, here in the us But I think it's notable, um, in a regulatory regime shift that we could have never seen back in the last administration or had this election gone a different way. And so I think that's overall extremely positive, um, for the industry as a whole. Um, and I really hope that it continues to trend this way. I hope it's a very successful, uh, acquisition. And I hope that Dare A Bit picks up a lot of volume from this, because I totally agree with Cyber. It's a great platform. They have a very strong position in the market. Uh, I'd like to see more assets listed there. And I know it's hard because there's not a ton of volume in some of the other names. And I know they have SOL and they have Ripple and there's a few that are on there, but they just don't have the traction that Bitcoin and ETH have. Um, and so hopefully this helps that along as well.

Speaker A: Yeah, that's a great point. In terms of IBIT, obviously, IBIT's been recently, uh, launching, uh, options in November of last year. That's Had a lot of good traction. I think the volume is about 35% of the deribit volume. The spreads are pretty tight. Um, if we looked at CME options before that, uh, those are pretty dead. So that's a step in the right direction for us demand. So maybe that trend continues with more choices with the deribit acquisition. Um, before we jump into the personal questions and kind of wrap up here, um, maybe uh, if, if someone wants to get in touch with Flodesk or they want to execute some trades or uh, hire your guys market making as a service. Greg, maybe you could just tell us where can they find more information?

Speaker B: Yeah, so um, www.flodesk.co is our main website. Within there there is uh, the ability to reach out to uh, the sales team here. Um, you just plug in your name, email, telegram, handle short descri. Um, you know that's how a lot of cold calls are made to us. And um, the sales team does a really good job at monitoring that. Um, you know we're on Twitter, our head of marketing is active there if uh, you know, if you want to, if you want to jump into a reply there. But typically the people that don't know anyone at Flodesk can look into Cold Call will go through our uh, we'll go through our website and um, post it out there and you know, for anyone that's real obviously um, we'll reach out for anyone that's not real. We ignore. We do see some funny, some funny posts there but um, but we do reach out. We're very responsive there. That's probably the easiest way to get in touch with us.

Speaker A: Perfect. And we'll have the links in the notes for any listeners who want to uh, go directly to the website. So kind of wrapping up here, I usually do three questions but maybe I'll do two each instead. Um, and we'll start with you Greg. Uh, what advice would you give to someone or your younger self, uh, for a career like yours?

Speaker B: Yes. Yeah. Um, so I actually think, and I don't know if today's the answer would still be the same but I do think that you know, it's not a coincidence that a lot of people who are in seats like Simon and mine started off in the same place and that was typically on um, a sell side banking trading desk. Whether it be equities, fixed income, fx, options, whatever it is, you know that's, it's a very good greeting ground for breeding, um, ground for uh, for jobs like this. Right. You learn a lot about relationship Building. You learn a lot about managing risk. You learn a lot about just operating within a broader organization, um, a hierarchy. All of these trading desks are kind of, we operate in the same way, um, whether you're on the sell side and the traditional finance world or in the crypto world. So I think that's a great place to start. Um, what I look for when I interview young kids, um, obviously I don't expect them to have, ah, experience trading over the counter, uh, crypto, Crypto, uh, at all. So I typically look for, uh, hungry talent who is finding a way to get to me very active, uh, on their own. You don't need to be trading big size, but I typically will ask a couple of pretty simple questions to make sure that I know this kid is serious about, um, the cryptocurrency space. Because at the end of the day, that's what you can't teach. We all work crazy hours. If you're working 12 hours a day, you're getting off light. Um, and so if you don't love the space you're in, you're not going to survive and you're not going to succeed. And so that's, you know, if you want to do this, I think you need to be really invested in the overall space because, you know, I, I think, as everyone who is probably watching this knows, there are weeks, months, sometimes even years where nothing happens. And it feels like, you know, you're constantly sitting there asking yourself, like, what are we doing here? Is it over? Um, and then you get a day like today, and it's the greatest place in the world. But these days are sort of few and far between. And so, um, there's a lot more days where you're grinding it out, um, and you need to have that passion for this industry as a whole to survive. And so that would be, uh, my advice. Um, if you're looking to get in this, um, just get your hands dirty, start playing around on chain, um, take deep dives on Twitter, listen to podcasts. There's a ton of information out there for you to have a very good understanding of, um, what deaths like ourselves do. Um, and you'll have a much better chance of getting into, uh, an early seat if you do that.

Speaker A: Fantastic. And, uh, do you have any favorite trading books?

Speaker B: Yeah, you know, I, I do. Um, was actually one of the first ones I read. It was recommended to me, um, early in college. Uh, it's Liars Poker, Michael, um, Lewis. And I think, you know, as I kind of just mentioned, like, it gives you A very good idea. And it's obviously the 80s or where I think it was in the 80s was a very different time than today. But I do think a lot of the principles still apply and a lot of the, the personalities, um, that you sort of read about in that book still exists on Trading Desk today. Uh, it's really funny. Um, and I think it's a great read for, if you want to know what it's like to be on a trading desk. Um, I would certainly recommend it. It's a good read.

Speaker A: Yeah, it's a classic for sure. How about yourself, Simon? Um, do you have any advice you would give to someone, uh, who would like a career like yours? And do you have any favorite trading books?

Speaker C: Um, yeah, well, I, I think Greg hit the nail on the head there. It's um, the, the, the number one attribute you need is to be uh, obsessive. And uh. And I'd say, um, we're without a doubt and particularly watching the chats, um, all of our traders are obsessive about what, what they do. It's um, yeah, they're, they're trading. Trade in their books through the day and, and then they go home and pa. Trade. Right. It's uh, they, they live and breathe crypto, um, you know, in, in various different ways. But, but um, you can't, you can't come into this as a tourist. You have to be embedded. You have to be fully committed. Um, the uh, my advice for sort of any, any uh, budding trader or quant or anything is, is really, you've got to. But there isn't necessarily a standard model of what a trader, uh, has to look like. Um, you've got to make money and you've got to make money in your own unique way because if you do it the same way as someone else, then uh, you're not going to be as good as them. Um, so for me, trading is all about finding your edge and then leveraging that edge. So for me, I came from more of a technical background, spent a lot of time on model. That was where I made my money. That's how I built my career. And then it sort of developed into other things. Um, when I arrived at Flodesk, the first thing was to sort of work out, okay, what's our edge here? How are we going to compete? And it turns out we've got a great technical infrastructure, really good client reach. So those are the things that we leverage. Um, I think that's it. Identify your strengths and then, and then work to those. Don't uh, follow someone else's playbook.

Speaker A: Mhm.

Speaker C: Um, and books. Um. Yeah, Liars Poker is a great book and I read that uh, uh, just as I arrived uh, in the city. It was. That sort of drove me to get into trading. But my favorite trading book is um, another classic. It's um, uh, Reminiscences of a Stock Operator. Yeah. Which you're very familiar with Greg. The. It's uh, it's a little bit older than Liars poker was it 1920s, um, uh, equity market. But it's incredible the uh, the, the similarity between the uh, the market there and, and the crypto, uh, token market. Now it's, it is the same. You've got all of the same behaviors, all of the same markets, it uh, um. Actions, all the same sort of operators and all of the same lessons. So it's a little bit harder to read with the language. Uh, but the lessons are uh, timeless. So I love that one.

Speaker A: Yeah, absolutely. A little bit sadder of an ending as well, but no spoilers. Well, thank you guys. I really appreciate you guys coming on. Learned a lot. Very insightful. And anyone who's interested in Flodesk please check out the show notes. You'll see all the links over to the website. Thank you. Thanks.

Speaker C: Cheers.