- TP Icap's Duncan Trenholme spoke to DL News about how his clients are seeking out Bitcoin and Ethereum derivatives.
- He also spoke about trends in the industry, including soaring Bitcoin prices and the Binance settlement fallout.
- He plans more hires for the digital assets unit amid more institutional interest in the sector.
TP Icap’s Duncan Trenholme got animated when speaking about a recent milestone in crypto — that he says went under the radar.
Earlier this year, CME Group leapfrogged crypto-native exchange Binance to become the largest exchange for Bitcoin futures contracts.
It happened even before US regulators slapped a $4.3 billion fine on Binance in November.
”That was huge. I don’t think that’s talked about enough in general,” said Trenholme, global co-head of digital assets at the world’s largest inter-broker dealer.
“It points to more traditional financial firms, more institutional firms, wholesale firms, coming into crypto.”
This move could be the beginning of a trend Trenholme expects to develop in 2024 — as the hard border between traditional finance and crypto begins to blur.
TP Icap, which matches buyers and sellers who trade more $1 trillion a day in a range of asset classes, has seen this first-hand.
There’s been a steady flow of customers from across the firm’s business that are eager to onboard and trade digital assets — including customers from fixed income and equities, global markets worth a combined $200 trillion.
Record monthly volume
And the FTX scandal has helped lure traders from crypto-native firms, helping drive monthly volume at TP Icap to a record in October, Trenholme said in an interview at TP Icap’s offices in London’s Victoria area.
One big reason: “Price action that has been caused around Bitcoin, Bitcoin’s run recently and I’m sure, some of that is down to anticipation of the spot Bitcoin ETF approval.”
While trading slowed down in November, Trenholme says the firm has seen a boost in trading activity in wholesale regulated crypto asset derivatives for the last year and half.
“December has been more active than November for us on the derivatives side,” said Trenholme, who started off in equity derivatives at the firm and moved to crypto in 2018.
And in 2024, he sees more client interest coming for the crypto world as prices soar.
“We expect more focus on over the counter derivatives, non-deliverable forwards, over-the-counter options” he said.
Two big developments
Bitcoin’s more than 150% surge this year has piqued curiosity from investors old and new.
But two big events in 2023 have been clutch.
This year saw the New York trade association dubbed ISDA, or the International Swaps and Derivatives Association, incorporate key terminology for digital assets.
Another big step, Trenholme noted, was the introduction of the first International Securities Identification Numbers for digital assets. ISIN numbers are prerequisites for clearing, reporting, and settlement of trades.
Bitcoin miners and Ethereum stakers
That has helped bring crypto into the fold of traditional trading structures, and has helped drive client demand, he said.
He sees increased interest in so-called hash-rate derivatives, financial instruments that offer volatility hedging for Bitcoin miners, as well as staking rate derivatives, that help with the interest clients earn when they stake Ethereum.
“We’ve seen more questions asked about those types of products,” Trenholme said. “We expect there to be a continued trend of our traditional customers either coming back to the market or getting into the market for the first time. If the market continues to be more of a bullish nature, then that’s only going to increase.”
It’s a trend that has been slowly but steadily gaining traction for about 18 months, he said, since the collapse of FTX and the US conviction of Sam Bankman-Fried.
The FTX effect
Since FTX, there has been a change in institutional investors’ attitudes — a “general shift in volume moving off unregulated offshore platforms onto regulated entities in major financial jurisdictions,” Trenholme said.
Among those also poised to cash in from this trend: Larry Fink, the boss of $9 trillion fund giant BlackRock, whose Bitcoin ETF is awaiting regulatory approval amid what he called a “flight to quality” in these trying times for crypto.
His line was echoed by CME Group’s Giovanni Vicioso, who told DL News in November that the 125-year old Chicago derivatives exchange was able to jump above Binance thanks to punters seeking out regulated — and thus safer — alternatives.
Such a flight to safety following scandals, fines, and convictions in the industry this year has been a double edged sword.
On one hand, the potential for a spot Bitcoin ETF from traditional fund giants including BlackRock and Fidelity has helped lift crypto prices, underpinning a new bull market.
On the other, crypto native firms may start to feel the pinch from an onslaught of regulated, compliance-savvy rivals.
Did clients flee Binance after that bombshell settlement?
It’s tricky to say, particularly because the flow data mostly comes from Binance, a private company that is not subject to public disclosure rules.
The industry, Trenholme says, has looked at the issue optimistically — as a hurdle that has been surmounted, and now everyone can move on.
And CME inflows are a signal that next year will see more evolution, that will include more mainstream financial peers.
Meanwhile, Trenholme says he sees a change in approach from big banks, which are thinking more “externally about the wider market,” beyond secondary markets and financial market participants.
Hiring and expansion
Trenholme and fellow global co-head of digital assets Simon Forster have been busy building their team, pulling talent with strong finance backgrounds.
Digital assets product director Nithya Sridharan joined in September after almost a decade at Credit Suisse. And Hina Sattar, a former trader at Goldman Sachs and JPMorgan, joined in October as sales director of digital assets.
He said he’s hiring “a couple more” for TP Icap’s Fusion Digital Assets spot crypto-asset exchange.
Trenholme said he’s seen some leave crypto and go back to traditional markets, which is a good thing, “because it brings people who are advocates for crypto back into financial services.”
Wintermute explained a similar dynamic in October.
“Our team is growing,” Trenholme said. “We’re just doing a very organic pace, in line with our products maturing.”
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