News Tech: According to officials at the company, Bloomberg stated that Hidden Road Partners is in discussions with hedge funds and several of the top 20 global banks about giving them access to trade or hedging their crypto risks.
The investing divisions of the cryptocurrency exchanges FTX Trading Ltd. and Coinbase Global Inc. joined Citadel Securities in a $50 million fundraising round that Hidden Road Partners closed last month.
A primary brokerage with an emphasis on foreign currency and digital assets is called Hidden Road Partners.
By addressing counterparty concerns and conflicts of interest, this move by the prime brokerage company is thought to facilitate Wall Street’s entry into cryptocurrency trading.
“Hidden Road is facilitating access to credit markets for risk-averse borrowers, lowering systemic risk for the ecosystem.”
Marc Asch, a former employee of Steven Cohen’s hedge firm SAC Capital and Point72 Asset Management, established the business in 2018. Foreign exchange services were Hidden Road’s primary focus before extending into digital assets in October. In a “tri-party” arrangement with a custodian, the corporation permits banks or other institutions to post dollars as security and earn profits and losses in dollars. This is only applicable to banks or other organisations that are unable to directly hold digital assets.
Customers can trade with liquidity providers including Virtu Financial Inc., Optiver BV, and Wintermute Trading Ltd. as well as exchanges. A growing number of cryptocurrency brokers and platforms are competing for the business of institutional investors. Contrary to many others, Hidden Road asserts that its pure-play structure would avoid any potential conflicts of interest.
“For the benefit of the customer and the cryptocurrency exchange or market maker, the company assumes counterparty risks. The startup would be responsible for finishing the defaulting half of the deal if a counterparty fails. In exchange, Hidden Road’s prime-brokerage fee incorporates this aspect of credit risk,” Bloomberg said. The company raises capital from investors like pension funds and pays them a return on their investment rather than maintaining a sizable balance sheet to lend to its clients. It makes money by giving clients funding for their trading endeavours.
According to Hidden Road, it intends to start clearing futures and options. In order to reduce risk, the corporation uses a real-time system that establishes risk ceilings and demands some collateral up front.