Kraken, a leading cryptocurrency exchange, has announced the launch of derivative trading services exclusively for professional investors in the UK. These services, targeted at Kraken’s second-largest market, will be available to investors classified as “Professional Clients” by the Financial Conduct Authority (FCA). According to Alexia Theodorou, the head of Kraken’s derivative products division, the derivatives were introduced to all eligible investors after a successful trial with select clients.
Expanding UK Market with Derivatives
Derivatives play a significant role in the cryptocurrency market, constituting 70-75% of the trading volume. While Kraken’s platform maintains a balance between spot and derivative trading, Theodorou observed that the growth rate of derivatives surpasses that of spot markets.
Kraken’s move in the UK represents a substantial investment in its derivative offerings. These services will be provided through Crypto Facilities, a Kraken-owned FCA-licensed company, on a regulated platform called the Multilateral Trading Facility (MTF). Trades will also be executed via Kraken’s Bermuda-based futures broker.
In 2019, Kraken acquired Crypto Facilities for over $100 million, and in 2020, it became the first crypto company to receive an MTF license in the UK. This platform enables Kraken to offer sophisticated products like perpetual contracts with multiple collaterals. Theodorou emphasized that these contracts provide professional investors a highly capital-efficient method of trading.
These contracts allow trading with different types of collateralized leverage and enable investors to hedge in the spot market or apply market-neutral strategies simultaneously. The company aims to attract institutional investors in key markets like the UK with a more profound and flexible derivative structure.
Global Ambitions in the Derivatives Market
Theodorou pointed out that the crypto derivatives market is still emerging. In stock markets, derivative trades can outpace spot trades by 10-15 times. Nonetheless, restrictive geographic regulations pose a considerable barrier to this growth within the cryptocurrency market. Due to regulatory hurdles, particularly in the US, South Korea, and some European countries, Kraken cannot currently offer its derivative products.
Nonetheless, Kraken has taken strides to expand in Europe. Recently, the company acquired a MiFID II licensed firm in Cyprus and purchased the US-based NinjaTrader platform. These initiatives are expected to pave the way for offering derivatives in Europe and America in the future. Additionally, Kraken has integrated US stocks into its mobile and web platforms, further broadening its offerings beyond cryptocurrencies.
It is reported that the company generated $1.5 billion in revenue in 2024 and is preparing for an initial public offering. Theodorou added that licensing efforts for offering derivatives in other countries would progress according to priority.
