Goldman Sachs starts trading Ethereum derivatives

abdelaziz Fathi

Goldman Sachs Group Inc. offered its first ever derivatives product linked to ether (ETH), in a significant step for a major bank that accelerates Wall Street’s embrace of cryptocurrencies.

The bank is also planning to offer over-the-counter Ether options trading as it has seen growing interest from clients in the second-largest digital currency, it said in a statement. The move comes nearly 16 months after the investment bank traded its first over-the-counter Bitcoin options.

Citing Marex Financial as the counterparty in this transaction, the Wall Street megabank executed its first trade of ethereum (ETH) non-deliverable forwards. The derivative contract pays out in cash based on the price of ETH, which gives institutional investors exposure without having to hold the underlying cryptocurrency.

In addition, users benefit from improved counterparty risk management and increased capital efficiency, with liquidity and access restricted to end users, which increases reliability.

NDFs comprise a small portion of overall crypto turnover but the product has experienced impressive growth in recent years as it provides a way to trade spot in markets where assets are not deliverable. NDFs are distinct from other products because they do not have central exchange or delivery. Rather, the trades are cash settled based on the difference between the exchange rate at the time of the trade and the exchange rate at maturity.

In March 2021, Goldman reopened its crypto trading desk and started offering Bitcoin futures contracts. The bank had announced similar plans back in 2018 before ditching the idea of a trading desk dedicated to crypto assets, citing regulatory uncertainty.

Having worked out security issues such as how it would custody the assets, the New York-based bank now uses its own money to trade with clients in a variety of non-deliverable forwards linked to the price of Bitcoin.

For this purpose, Goldman Sachs assembled a team in New York to operate in making markets in crypto assets as much as they do for currency or stocks instruments.

Goldman Sachs has been clearing CBOE and CME Bitcoin futures contracts for nearly four years now and is providing clients liquidity for those futures. As for physical bitcoin, its top executive repeatedly said the bank appears unlikely to fully support the underlying cryptos until it has the backing of the US regulators.

David Solomon, who has been the Chief Executive Officer of the investment bank since 2018, said they are exploring the potential of tokenization and stablecoins as part of its efforts to modernize the legacy payment systems.

Solomon added that he might consider launching a cryptocurrency after JPMorgan Chase has become the first US bank to launch its own digital token. Quite apart from the stabelcoins, the next stage of exploration for Goldman Sachs is asset tokenization and frictionless payments .

Read this next

Institutional FX, Interviews

ION Markets for execution and clearing: Francesco Margini at FIA EXPO 2022

The CPO of Cleared Derivatives at ION Markets spoke about the need for automated execution and clearing in times of surging volumes and increased volatility.

Institutional FX

FIA EXPO 2022: Baton Systems President on building post trade rails for capital markets

As the world’s largest trade show for the listed derivatives dealers, the FIA Futures and Options Expo is a high point for the global cleared swaps community, with dozens of panels, educational sessions, networking opportunities and more.

Industry News

Brokeree Solutions Wins the “Best Emerging Fintech” Award

2022 has become, for Brokeree Solutions, a time of new inventions and developments. We are pleased that the industry has appreciated this emergence of new technologies

Metaverse Gaming NFT

Glip raises $2.5 million to develop class-A Web3 games ecosystem

Web3 game discovery & wallet app, Glip has raised an additional $2.5 million in new funding from a range of investors, bringing the total investments it received to $6 million thus far. 

Inside View

Black Friday and trading: OctaFX presents the results of its client survey

What are the attitudes of traders toward the Black Friday period? What are their trading patterns during the shopping season? OctaFX asked its clients all the most important questions.

Retail FX

Dukascopy warns of clone website dukascopyd.swisbank

Switzerland’s forex bank and broker, Dukascopy has alerted the market and consumers to a clone of its authorised brand. The website, which remains active, is impersonating the genuine investment firm in an attempt to deceive people into handing over their hard-earned money.

Crypto Insider

A Step-by-Step Guide on How to Get a Crypto Wallet

The crypto ecosystem is very much based on the existence of a crypto wallet, as it is the gateway that allows users to securely store their assets with full transparency and protection.

Digital Assets

Finery Markets raises $5.5m to expand multilateral institutional marketplace for OTC crypto

“Running the first multilateral institutional marketplace in the crypto space, we aim to establish best practices across trading, risk management and operational standards for crypto.”

Institutional FX

TT adds products listed on SGX, ASX, HKEX, JPX to algo execution suite

Trading Technologies International, Inc. (TT) has added four major Asia-Pacific (APAC) exchanges to marketplaces supported by TT Premium Order Types.