AD Derivs. Podcast (Ep. 76) - Simran Singh, Monaco

Speaker A: Sam.

Speaker B: Um, hi everyone and welcome to the Amber Data Derivatives Podcast. I'm here with Simran Singh, who is the CEO and co founder of Monaco, and he's also got a background at GSR and Goldman Sachs. Simran, how are you?

Speaker A: Well, thank you. And thank you for the opportunity, Greg.

Speaker B: Yeah, we've been in touch for quite a while now. I mean, uh, we've worked together for quite a few years and you've been a huge presence in the volume space, in the crypto volume space. So it was long overdue and I'm very happy to have you on. Um, I thought maybe we could start a little bit with your background. Like, you know, you started out at Goldman Sachs, uh, professionally trading I believe, crude oil volume, uh, before going off to GSR and really getting in the crypto space. So maybe you could just kind of, uh, walk us through that. How did you get started trading and trading volume in particular?

Speaker A: Sure, yeah. So I graduated college, uh, 2017 and hit the desk at Goldman initially first, uh, in a risk management role. And then soon you realize that the truest form of risk management is when you're in a trading scene and get to experience this full force. Um, I like to say the first white hair I got in my beard was when oil went negative, which was, you know, once in, once in a lifetime is one thing, but once in history is another kind of phenomenon. Um, and it's a testament to the fact that all models are wrong. But some models are useful and when you're forced to really adapt those conditions, it's quite, uh, incredible. And so during that time I got to call oil producers, airlines, hedge funds, you name it, and really gain appreciation for what makes oil prices move and how people speculate how, uh, people hedge and how those market forces kind of come together. Um, and then later on I transition to uh, GSR joining the crypto market maker in 2022, uh, first thinking about other business lines in addition to token insure market making, so sticking as a service to economic design, NFT trading, um, and leveraging my background on the trading side to help build out those product lines. And then was most recently heading up defi trading uh, at gsr where it was really about porting over existing strategies that we knew that worked on centralized exchanges in CI, uh, and working to bring them on chain and, and capture arbitrage wherever opportunities for Brussels.

Speaker B: Yeah, that's fantastic. I definitely want to dig into the oil going negative. So, uh, that was quite an eventful time. I think it was April 2020 if I remember Right. And we had the front month future because there was no place to store it. The cost of storage created the contract to become negative. And so no one wanted to take delivery. People were willing to sell. I remember seeing it bounce off a penny and then trade as low as, I think negative 11 or negative $19. CME started listing negative strike prices. Um, what was that like? I mean was it, I mean this, this is Goldman. This is a huge desk. Uh, you're trading Vol on that market. How does. I mean that breaks the models, right? Black Scholes, model black 76 assumes log, uh, normal distribution, uh, which essentially breaks if. If uh, zero is no no longer bounded. How did you guys adjust that? I mean how does everything change?

Speaker A: Yeah, sure. Uh, so I would say it was. That kind of phenomenon was a convergence of a few things, right? One was you had this global supply war where Russia, Saudi, um, and other oil producing countries were simply saying hey, we're just going to literally try and undercut each other. And so it was a race to the bottom. You had a over supply uh, issue effectively and no place to put the storage. And you had this phenomena of a global pandemic. So demand was absolutely destroyed. Right. And oil specifically it was wti, which is landlocked, which is the, which is the type of crude that went negative. It actually settled negative 3763 uh on the day. It's like that number. It's hard to forget when you're sitting on the desk and you're like oh my God, this is, this has never happened before. And you rightfully called out a lot of models will break because when uh, oil goes negative they actually switched to a normal margin model, I believe it's called Bachelier. To model uh, these priced moves as opposed to using log normality. It was, it was an incredible learning opportunity and it was very much a trial by fire. Some market phenomenons that we observed, right, the front month liquidity pretty much dried up. It was actually easier to trade volatility a year out than it was to trade front month because the market makers on the screens just became uh, wider than the Grand Canyon I think is the best example I can give where no one was really willing to provide short term gamma, um, or provide the clarity in the front month. You had a bunch of, I would say oil producers who were strapped for cash and were forced to unwind positions that were in the money and they were willing to take steep haircuts in because they needed the cash today as opposed to being in the money and trying to monetize those positions a year from now. So the convergence of like the fundamental story, global pandemic, um, all kind of came together to produce this phenomena. And being able to sit there at the heart of an oil desk, including sovereigns producers, you name it was a very invaluable learning opportunity.

Speaker B: And were you guys just kind of facilitating flow or did you guys have any like prop positions on that you guys were managing as well?

Speaker A: Well, Greg, I mean banks are not allowed to prop trade. Come on.

Speaker B: Uh, or principal, I should say.

Speaker A: Yeah, I would say there was an expectation that there was going to be height involved. You rightfully called out that the first negative strike put options had begun trading maybe a week or two weeks before, uh, then, which was kind of confirmation for the market that hey, DME will let you actually have negative, negative, uh, strike settled futures. Uh, I think there was certainly a view, um, we had deaths out of Singapore that have a more aggressive risk appetite, that had some directional exposure in the context of the broader portfolio. But my job was mostly just focusing on flow management and making sure that, hey, uh, if I have a 35 Delta and someone's got a 65 Delta, we're risk managing that basis quite, quite well when it comes to actually putting on options trades.

Speaker B: Yeah, that's fantastic. What a, what an interesting time to, to trade, um, oilvall. So kind of moving on from that. So after Goldman, how did you transition into crypto? Like, what was the spark to get you to go to GSR?

Speaker A: Sure. So I doubled back in BTC, I want to say, back in 2017 where there wasn't much else to do besides trade Bitcoin. Uh, and it was really the Uniswap V2 what paper that made me be like, oh, they took a hyperbol, uh, XY equals K and made a market out of it. And like, what is it about this space that's attracting so much talent? Um, there was a Cambrian explosion of defi summer. And so all these folks flocking to the space that was still novel really made me think, I'm just like, well if all of this goes to zero, I can always go be a quant trader and researcher somewhere else. But if I get to be a small part of something much bigger and markets are still inefficient and I can play some role in helping forge them and be a participant, then that feels like a pretty good convexity flag. And viewing most things in life, uh, as an option, some people view it as the cold way to view the world. I view it as A blessing because it makes life and decision making a lot simpler. And so for me this was a intellectual curiosity, uh, motivated by, I would say an opportunity to monetize. And GSR was and still is a leading market maker in the space, I would argue. And there was the pedigree of having been founded by founders, uh, that were also oil traders at Goldman, the G and R of GSR. And so I joined in 2022 and I would say I probably top ticked the market. Right. I think, uh, 2021 is DeFi. TVL had been the highest I joined firm was expanding. The industry was still growing. But then you begin to see the signs of overextension, uh, which led to a very fun next three years of my time in crypto.

Speaker B: Yeah, we had the ftx, we had Terra Luna, we had three Arrows blowing up on the grayscale trade M. Those are all kind of interesting things. Uh, then we had this massive recovery. And today is quite a, ah, down day. I think Bitcoin's down 9%, 10%, Dvol is at 74. Um, that's kind of an interesting time. But how do you view like the crypto volume trading space and making markets there, um, compared to traditional finances, it's very similar. Um, obviously you went into DEFI as well, but I think GSRO is a big player in deribit and some of those, uh, traditionally listed exchanges or CEFI exchanges. Is that a very similar experience to TRADFI market making or is it different or what does that look like?

Speaker A: Um, there are certainly some similarities, but I think probably the biggest difference really comes in why people trade these derivatives, uh, in traditional asset classes. And actually had published a piece about this a few weeks back why altcoin options, for example, haven't taken off as much in crypto. In traditional asset classes there are natural buyers and sellers. And going with the oil example, it's like oil producers are naturally long oil. They need to hedge their downside. So they buy, put options, sell call options, enter into these structures that hedge their, hedge their downside. Then you also have consumers, you have refiners, you have airlines, um, that are effectively taking the other sides of these trades. And then you have a bunch of speculators, whether it's macro funds, um, or anyone else that simply want to express a view on either term structure, volatility, uh, fundamental mispricings and regional dislocations. Right. So there's this hodgepodge of things that leads to interesting phenomena to happen and to have a healthy market. You also see this in equities, you see this in rates and fx. In crypto, I would argue that just given the early adoption of participants, a lot of that flow has just been dominated by retail. And you find that retail appetite is so prevalently met by perks that who in their right mind would be like, oh, let me pay 30vols of bid offer in order to get this convexity if all I want is linear exposure. And so I think fundamentally appreciating that the flow tends to often be one way and things like yield, carry or vol carry, um, in the form of covered calls, cash secured puts tends to be the dominant form. Right? And I think that was kind of the 2021, 2022 inning. Then you begin to see this long drawn out period of low volatility. I still remember There was this ETH call overwriting program that happened in 2023 which was like one of the largest V selling programs that ETH had ever seen. Which isn't saying much because the market was still nascent, but it really shook the market because there was such little float. Uh, and then I think 2024 is really when you begin to see the uh, dare I say commodities like behavior, uh, of crypto, right? Where think about gold where you can actually have positive call SKUs. Most people who come from an equities background are just like, oh well yeah, puts should trade over calls. People value downside protection. This makes sense. But then when you think about precious metals where you can actually see uh, risk to the upside, you begin to see very similar phenomenon, uh, in BTC and eth. Uh, this is specifically around the news for the Bitcoin ETF announcement. You also saw interesting things happen when the merge was happening, the fundamental change for uh, ETH infrastructure. And so like all these little events were leading to interesting market microstructure and idiosyncratic dynamics. And I think that is now continued as you begin to see like liquidity in spot ETF options markets. And I would argue that spot ETF options markets are honestly on par, if not sometimes exceeding what you see in native markets, um, the likes of Deribit.

Speaker B: Yeah, it's really interesting. And so sort of the flows, I mean it's been my thesis and I'm sure a lot of other people's thesis that the flows from the traditional side really are kind of like that call overriding type of flow. Maybe some put buying, which is what they do with equities or any sort of risk on portfolio. And it's kind of what we've seen since the launch of the Ibid options, uh, volume consistently grinding lower and then the long dated risk reversal flipping from positive to negative, meaning the puts were cheaper at first and now they're more expensive structurally. Does that create an opportunity for the crypto natives, um, or is that dominant flow, right. So to speak?

Speaker A: I would say it's very similar to what you see in other asset classes where like volume selling in general tends to work until you see like the convergence of just enough factors to rip people's face off. Um, right. Like for example if you were just massively uh, call selling ahead of uh, the ETF announcements or the Trump election, um, or even ahead of like there I see the debasement trade. Right? Like these things work until, until they don't. And then you see these sharp moves, uh, the likes of gold, silver and even what BTC had briefly before. You see this massive retracement uh, over the last month or so. Um, I would say like the flow is simply driven by the fact that why should people hold this asset? Right. I think like if you view it in a macro context and view it as a store of value and put it in the same category as gold, like fine, okay, that flow is misguided and people should simply be thinking of it as a store of value and dare I say accumulating it. And you still see central bank buying of gold. Right. Even at the highest of levels. So one could argue that gold BTC should have very similar um, behavior. But the truth of the matter is that institutions are still, I think hesitant to adopt Bitcoin as a standard store of value. And because of that, while that remains the case, I think covered call is programs are not going to go away anytime soon.

Speaker B: Yeah. So the traditional investor views it as a risk on asset and we've seen, I mean if we overlay the software stock ETF versus Bitcoin, the chart looks almost identical. So it's still, it's being treated as a risk asset. And so if you view it as a store of value, you're kind of um, outside of how it's being priced. Right. Your view is not the standard one. Um, but maybe that changes in the future. We'll see. Who knows. Okay, was there any kind of traditional, um, not traditional but like um, reoccurring opportunities in sort of the delta neutral space that you would see in Bitcoin volume or sort of Bitcoin funding, like fixed versus floating type of trades or anything like that. Is there anything that a trade I

Speaker A: tend to simply uh, I tend to like ball carry. So Long long gamma, short Vol. Um in specific market environments. And the only reason is because like when, when nothing is happening in the market, nothing tends to persist for extended periods of time. Uh, so you pay a little bit more data but then the Vol. Compression uh happens. Uh, but then when you have idiosyncratic term structure events, right, like I think elections are one of them, uh, the gamma really pays off when you need it. So I think just, just more often than not the contangled all term structure tends to lead to a nice wall carry is what I would say. And you construct that to be delta neutral if you really want. Outside of that I tend to like one by one and a half and one by twos where I'm owning the wings. Um, and very much for, for a similar thesis, right, which is like on average I think volume is fairly ish price um, but can get elevated at times. But it's really on the wings that you, you want to have that protection.

Speaker B: Interesting. And so speaking of sort of the fall carry trade is that like a diagonal structure, you're long sort of the short dated one and then short sort of the long dated option. So short vega and then kind of long the gamma side. Is that kind of how you would show that?

Speaker A: That's exactly it. Long the front, short the back. So long gamma, short vega.

Speaker B: Yeah, very interesting. And then the hope there is that Vol picks up um, and then that term structure kind of flattens and maybe that volume component doesn't matter too much if the underlying is kind of moving nicely.

Speaker A: Exactly right. The volume. Volume, uh, just to get second order for a second the volume of the front tends to be much higher than the volume at the back. Uh, and so you can size it in a way where uh, as that volume compresses the incremental benefit of just owning the front and being just pure gamma is kind of the play. And what's actually interesting if you think about it, think about how much of the volume in traditional like equities markets or index volume is just zero dtes, right. It's dominated by these people trading the front. And now with the emergence of like these 15 minute markets on Polymarket realizing that most people really just want to express very short dated views um, and kind of gamble with maybe some term structure effect. But that's where like the interest in I think the, the front part of the curve really comes in.

Speaker B: Yeah, that's fantastic. That's super interesting. And then kind of in terms just going back to commodities real quick and negative oil. So we talked about precious metals we touched on it briefly. I mean we've seen precious metal. I mean I think silver volume right now the 30 day Vix calc is around 95. I think gold's around 36. Um, I mean 95, that's ETH and Solana volatility and ETH and Solana have come from zero to thousands of dollars. So the silver has not done that in a long time. So that type of volume, I mean it's quite expensive. Um, well, do you think that's justified? Is there a risk? Uh, right now the chatter is does Comex have the physical to deliver and if they don't do shorts just have to buy this thing all the way up to thousands of dollars. Um, is that thesis, uh, something you subscribe to or do you think this is kind of business as usual and maybe there's a Vol sell here? How do you view that?

Speaker A: I think the first leg of the journey I think was simply continuation of central bank buying and people realizing like, oh my God, the debasement trade is actually unfolding. It was unfolding slowly and then it accelerated. Um, and I think the second leg was really people then piling into the trade, especially like uninformed retail, who sees a flashing headline, uh, and then wants to dive in, which then tends to dislocate paper markets and leverage from, from the physical market. Um, I think a lot of people were quoting just the art between Shanghai, uh, and cme for example, as to whether Comex has the spot, like spot silver, uh, or not. Like I am not a metals expert by any means, but I tend to be dubious of uh, people saying like the physical market, the paper market is much bigger than the physical market. But it's one of those things where if you're going to take on a position, yes, you're taking some level of credit and counterparty risk to the underlying venue, but then that's just the price that you pay for engaging in such a speculative market. I think is the short answer yet.

Speaker B: Now imagine if they don't have the asset, shorts just have to buy back because they can't deliver. Um, that's very interesting. One of the things that's, and maybe you have an opinion here. I know we're kind of moving away from crypto, but I'm just curious on your thoughts. So a lot of the narrative around precious metals is the debasement. The thing that's not adding up to me however is that if it was a debasement trade flow. So for example, I think US dollar is down 15% since January 1, 2025, gold is up like 100% and silver's up like 300%. But what's interesting to me is that with this whole recent move in precious metals, we're not really seeing the 30 year bond move. The yield is sticky. I would imagine if it was the basement trade. The last thing I would want to own is 30 year paper. Uh, yep. Do you think that that's uh, maybe contradiction uh, of Schwartz to the debasement trade thesis?

Speaker A: I think it's a reflection of the fact that a lot of the noise around debasement is honestly a reflection of administrative policies rather than long term. Fair value I think is really the short answer. Um, I think if this was going to be a long term thesis and predicated on the idea that the US dollar is forever going to fall, um, or over the next 20 years is going to remain quite poor, then I think you would expect to see that reflected in the rates curve a lot more. I think this is honestly just more of a flash in the pan that is now retraced with the advancing of a more hawkish fed.

Speaker B: Yeah, interesting. So in that case, I think the volume sell is pretty interesting on the silver trade. Um, yeah, interesting. Cool. Um, okay, so you mentioned on gsr, uh, one of the things you were uh, heading was defi trading and replicating some of the strategies From CEFI to DeFi. What's kind of the structure there? What was the thought and the strategy and the process?

Speaker A: Yeah, sure. Um, well if you really think about it, amms, uh, you can view them as a novel innovation. I think they're a pretty cool structure but still remain capital inefficient. But at the end of the day an AMM is really just a continuous order book, uh, with limit orders and some idiosyncrasies around minting and redeeming positions. So simply porting over what we were doing uh, at the HFT side of things on the binances, the coinbases of the world, uh, applying them to AMMs and then also running cross any arbitrage was just kind of the level zero of what we were focused on. Outside of that it was thinking about things like incubations and what is the broader DEFI industry look like. Um, and then serving as a sounding board for volatility products. Right. And I think even if I look back over the past three years, folks have tried to launch structured products in crypto on chain and it's one of those things where I'm like, I coming from a derivative background, love that concept and I'm just like, oh, I wish these kinds of things take off but ultimately if the underlying market is not sufficiently liquid enough then no amount of esoteric exotics are really going to be able to survive if there is insufficient demand.

Speaker B: Interesting. So you guys are focused on sort of the delta one aspect of DeFi. What about um, sort of the defi venues like Derive or avo uh, for trading options or perps and things like that. Hyper Liquid.

Speaker A: Yep. So I would say uh, EVO or any sort of other dov like risk finance for example was, was quite interesting and just another form of Gamma that tends to lend itself to a more OTC style execution than anything fully on chain. In terms of Derive previously uh, called Lyra if I'm not mistaken, I've had many conversations with them. I do think it's a very interesting paradigm and uh, structure to differentiate and there were certainly a few opportunities for cross selling arbitrage between that and deribit pricing. But when there is a mismatch, I would say in like volume and liquidity profile, even if that ARB is there, the capital intensive nature of having to quote on two markets I think tends to be a binding constraint. Right. Like an ARB is only as profitable as your ability to monetize it. And uh, if either it's not there in size or it's very punitive from a capital cost uh perspective to do it, then it's probably not worth it.

Speaker B: Yeah. Interesting. And so after um, doing this at GSR for quite a few years, what brought you to found or co found your own company and lead that called Monaco and what does Monaco do? And can you give us a background of it?

Speaker A: Yeah, sure. Um, as for kind of how I found Monaco, I would say it's a combination of a few things but ultimately the market as I see it in terms of what is addressable is not really these offshore permissionless uh, trades that happen. Right. I think Hyper Liquid is a very good product, Lighter is a good product. But the name of the game is actually how do you tap into a 69 trillion market uh, cap a little bit lower now today given the market sell off, uh, or how do you tap into an eight to ten trillion dollars retail commodity volume or three and a half trillion dollar private credit market. Right. The key distinction I think is taking a regulated first approach, taking a compliance first approach. And so Monaco, you can call it a global trading network, a liquidity layer, a central limit order book is very much a decentralized exchange founded on the premise that if you simply want to trade crypto assets, you should be able to do so in a permissionless way. If you want to touch regulated tokenized securities or commodities, then the name of the game is very much going with the KYC KYB Genius compliant first approach. Right. Um, and there's a few ways that we do that by partnering with industry standards, but then also thinking about, well, why have things like tokenized equities not taken off previously? You could argue it's because people don't want to take FPV risk to these abstracted versions of tokenized assets. But the truth, in my opinion is until we give people incremental benefit of holding tokenized Nvidia on chain in the form of being able to borrow, uh, against it or lend it out or dare I say, post it as collateral, why should people even hold it on chain when they can just lend it to short sellers, uh, on Robinhood or Interactive brokers? I think utility has really been the missing piece. Uh, as for why now, I mean you already see the NASDAQ and NICE moving towards 24.5and 24.7markets respectively, and adopting the tokenization standard. Right. So the on chain economy is not just coming, it's already here. And being able to kind of sit in the center. And convergence of C5 versus DeFi is what Monaco is very much about.

Speaker B: And so do you believe independent of bitcoin prices or crypto prices as a whole, really financial infrastructure is going to be migrating towards blockchain technology?

Speaker A: Never and always are. Two words you should, uh, always remember to, uh, never use. That said, I think there's a 99 delta of this thing.

Speaker B: Yeah, interesting. Okay, we've talked about sort of the lacking components of on chain equities right now in terms of utility, in terms of using them as collateral and so on and so forth. What would be the benefits in your view of tokenized equities and sort of that world migrating to blockchain technology?

Speaker A: Yeah, sure. Uh, I think one really evident mark, one uh, really evident use case, uh, is when you have macro events unfold, uh, and all other markets are closed, crypto is the first to take a, take a dump. Right. You see this, Um, I think during the yen carry unwind of 2024, if I'm not mistaken. Um, and so, yeah, on the weekends, whenever these macro announcements happen, when people want to go risk off mode, they just express it in cryptograms. But as you move through to more 24. 5 and 247 markets where these securities, uh, are accessible, one, I think it actually reduces overall systemic volatility because now you can actually avoid that gap risk of oh my God, markets are closed on Friday and even with extended hours I have to wait so much time before I can actually express a view. So reduction in volatility but then also increase in capital efficiency is the no brainer. Right. Um, you have well established risk management tools like SPAN and sim, which are industry standard that centralized exchanges and OTC clearinghouses use for margining. Thinking about um, how much capital we should have on hand for uh, derivatives positions and if you move to a fully on chain market, I think margin becomes a lot more easier. You can do it in continuous time, you can be more customized as for what is eligible collateral and capital efficiency and risk management are the core bedrock of what drives a lot of these large scale institutional adoptions. And being able to do that fully on chain I think is a no brainer and inevitably the right answer.

Speaker B: Oh yeah, fantastic. And so is Monaco in beta? Uh, is it launching? I mean what's kind of the timeline, what's the roadmap, what's the initial product and what's sort of the future product in your vision?

Speaker A: Sure. Uh, so the initial product is a central limit order book that'll support spot, perhaps prediction markets. Uh, we're entering private beta over the course of the next few weeks and working with a few different front end partners who are all catering two different trading styles. Um, right. I think the name of the game is you want to create a customized, tailored experience for people to be able to access markets in whatever their respective trading style is while still accessing a shared liquidity layer. And that's where the benefit of multiple front end partners comes in. As for where Monaco will go from there, I mean we're going to probably roll out, I would say Mainnet, uh, by the end of this year. We're working to uh, finalize industry standard partners, whether it's tokenization partners, compliance partners, you name it. Um, but yeah, excited to be building Monaco properly.

Speaker B: Yeah, that's fantastic. So it's going to be essentially a flexible central limit order book in a sense that it can support multiple types of assets, prediction markets, tokens, tokenized stocks. Um, does the central limit order book require um, a risk engine as well with each one of these, or does the exchange run the risk engine and use kind of like lease out your central limit order book to essentially uh, clear trade? How does that work?

Speaker A: Sure. So we are the exchange central mid order book. Right. Uh, that, that is the protocol itself. Uh, I would say the risk engine is one of the most important, if not the most important pieces, uh, of building a very successful product like this. Um, I think even Yevgeny was posting about this yesterday where he said, you know, people talk about throughput and latency as if they're the, they're the final roadblocks for the umpteenth perp decks. But the truth is like risk management and building a proper risk engine is actually what is the massive lock. Right. How do you think about adl? How do you think about bad wigs? How do you think about liquidity? And a lot of these lessons Tradfi has actually learned 20 plus years ago. And crypto has a habit of relearning them. I think we can kind of front run that, or dare I say speedrun that, uh, by addressing these things head on, um, and like leveraging what's already been existing in the market, but simply adapting it for a 24,7 world with crypto specific nuances.

Speaker B: Yeah, yeah, very interesting. And so some of the things we do see in Tradfi, uh, for example futures on silver, they raised their margin requirements and things like that based on some threshold. I imagine prediction markets, those are probably pretty easy to do a risk engine on just because limited downside and upside. Then once you start layering options, it gets a little bit more complicated because you need volatility marks, especially when the market has disappeared. And fast markets, um, perps are tricky as well because you don't want to get, as you said, those bad wicks where everyone gets stopped out for something that didn't really trade. Um, how do you think about having the flexible, uh, um, risk engine with the flexible, um, order matching?

Speaker A: Sure. So I think at least when it comes to margining and those bad picks that we were talking about, that's where I think having a robust and reliant, uh, data stream comes into play and for which we've partnered with Trainlink and are using their data streams platform combined with some additional internal proprietary, uh, modest applications on our side, I think having measures like that combined with things like circuit breakers. Right. Limit up, limit down, these are things that exist in commodities for a while and also give market makers, I think, some sense of peace of mind of, uh, hey, if someone's nuking the order book, uh, we can actually halt trading temporarily, let markets resume in an orderly fashion. And this is actually better for buyers and sellers, makers and takers. Right. And I think not having those in crypto, as to some people, been a very fun thing because it's like Oh, I like this short feedback loop of just getting liquidated or having 10x profits very quickly because it's a high wall asset class. But if you actually want on chain adoption and a multi asset class venue, uh, those things need to be thought about. And so I think incorporating them out of the box for traditional assets that have less on chain liquidity is going to be a no brainer. Right. So once we incorporate equity perps or commodities perps, uh, I think having limit up, limit down and circuit breakers is part of the core ethos.

Speaker B: Yeah, it's interesting because in traditional finance when I think of the commodity space and I think, oh, lean hogs have gone limit up, uh, and the market's closed for the rest of the day or whatever it is, that's kind of easy because there's essentially one venue in one pit and that one venue and that one pit can close markets. When we talk about crypto, it's a distributed, uh, network of venues and trading. So even if your exchange goes limit up, the market is still trading outside of that. And so the market makers still have the risks. The risk is still existing out in the world. How do you think about that?

Speaker A: Well, I would actually argue that actually introduces more opportunity for makers. Um, very much so, because then it just leads to cross selling arms. Right. Like for market makers who are simply trying to capture bid offer all day long or uh, trying to arbitrage prices, having one venue that is uh, either lagging and having a lead back effect or simply is less liquid or more liquid, I think that just introduces unique arbitrage opportunities for these guys. But if the model is to build a venue that is supportive of both makers and takers and is mindful and partners with, dare I say, institutions that have a foothold in both the traditional world and the crypto native world, I think they are best positioned to do so. Right. What we're trying to build ideally is not something that's simply for crypto natives. Right. It's for the same people that are click trading on Robinhood or interactive brokers or also applying through a term front end and want to have LLMs incorporated with this. This is for your average retail users. And in order to facilitate that you need to have these measures in place while still being like, oh well, the best participants and market makers who are able to provide liquidity are going to be the ones that have cross venue arbitrage and can think about those decisions, uh, in highly volatile markets.

Speaker B: Yeah, I see what you mean. And so like the market maker will have the Opportunity to hedge between sort of the two venues. But your venue being limit up or limit down kind of puts a pause on like new positions being open and all that stuff. And essentially the risk that's part of the, uh, Monaco ecosystem, even though the rest of the world is still kind of open. That's very interesting.

Speaker A: Um, well, the truth of the matter is, right, like an exchange should never go solvent or insolvent rather. And if it does, then that's just bad risk management at the end of the day. So the priority zero of all possible things is to make sure that everyone is made whole and the exchange doesn't go in. And so the probability, I would say, of a venue like Monaco, uh, halting trading while others are still engaging is probably pretty low. And even if that were to happen, I would argue that the liquidity on those venues would already be so suboptimal that there's the minimus trading. Right. So just because someone else has an alter trading, that doesn't mean that trading is still actually happening because there's this huge divergence in prices.

Speaker B: Cool. And then what chain is, uh, like what, uh, cryptocurrency chain is Monaco being developed on?

Speaker A: Sure. So we're actually using off chain matching on chain settlement, where the on chain settlement is happening on sei. Uh, the goal is to ideally be cross EVM compatible and really abstract away a lot of these chain specific nuances, uh, for people to trade. Right. Users shouldn't have to think about paying gas or deposits or paying gas for settlement. We want to support native, um, minting directly from your bank account, minting USDC into your spot trading and being able to do that, dare I say, under a minute. Uh, the North Star is very much think about how many people pay for their overpriced Starbucks with Apple pay versus those that know actually how Apple pay works under the hood. I would argue that's a very small minority of people and that's what we want to do for the trading experience, where most folks who are users don't really care about where the underlying settlement layer is. They simply want something that is highly performant, accessible, transparent, uh, and delivers that unique experience catered to their trading style.

Speaker B: Cool. Cool. Um, so typically Simran. I like to end the podcast with kind of two questions that I ask all my podcast guests. Um, the first one is do you have any favorite trading books? And the second one is you're a busy guy, but is there any hobbies that you do outside of work, um, right now that you're passionate about, uh, sure.

Speaker A: I'll take those in sequential order. Uh, Stavrik, Trading book. I, I feel like trading book in particular might be too narrow of a category, but Natenberg's Options Volatility Trading is, is probably the, the bible of folks who go into options trading. Even when I was an Internet Goldman, that's what was given out to everyone or that's what everyone referenced. Um, I think some people prefer hall, other people prefer McDonald every. Some people go to Talib. Everyone has their own favorite author. But I think think Natenberg does a pretty good job of going through basics and really building the intuition behind the math as opposed to simply focusing on the math. And I think when you're sitting at a trading desk, being able to do quick mental math is useful, but not as useful as understanding what your second order and third order effects are. Um, and so I think that that is why Natenberg tends to be a pretty good source there as opposed with reference to hobbies, I would say. I tend to enjoy reading Kraffle Time with friends. Um, it is a privilege to be able to do what you love and love what you do. And so if you live a life where you get to do what you love, it doesn't feel like work, I think is the core.

Speaker B: Yeah, for sure. That's a, uh, and that's like a superpower because you can't put in the hours if you don't like what you do and if you like what you do, you can put in the hours and who can catch up. It's, uh, an unfair advantage. It's a fair, unfair advantage. That's great.

Speaker A: Uh, it's a blessing.

Speaker B: It's a blessing. Yes. So, uh, Simran, if anyone wants to learn more about Monaco or maybe reach out about the private beta or maybe become a token partner of some sort, uh, where should they go?

Speaker A: Sure, uh, they can go to our website, uh, 0xmonaco.com they can reach out to me, uh, at Urban urban on Telegram at 0x, Turbine Urban on X or Twitter. Uh, happy to talk to folks, get their thoughts and inputs on what we're building, um, and partner with key design folks to help build a really successful product and experience.

Speaker B: Well, thank you so much for coming on the podcast. This is Simran Singh, CEO and co founder of Monaco. Thank you so much to everyone who tuned in. We'll catch you next time.