00:00Perpetual futures are something you traditionally see, for example, processing tens of billions in crypto.
00:06Why expand this out into hard commodities, into precious commodities?
00:11Thank you for having me here. I think it's a great question.
00:14I think we have already seen the innovation that perpetuals have brought onshore with the launch of our crypto perpetuals.
00:21And we have started to see a lot of crypto perpetuals grow on real-world assets like metals, like S
00:30&P, like crude oil, offshore.
00:33And what we are trying to do is build an ecosystem so that they can be offered in a regulated
00:39platform like CalShine.
00:41Who is your audience here? Is it those who already trade on CalShine, maybe are more used to trading crypto?
00:45Or are you trying to tap that retail investor who's maybe in ETFs now or maybe trying to deal with
00:51rollover headache costs of futures themselves?
00:54Are you trying to gain market share in this overall industry?
00:58I think we look at ourselves at servicing both retail as well as institutions.
01:03If you look at gold or silver, they are products that are used by retail as well as institutions.
01:10They are a store of value. They and perpetuals provide for a continuous exposure.
01:14They don't have any expiry, which means that you don't have to pay the roll costs.
01:21They concentrate liquidity in one contract.
01:24So there are many benefits that both retail as well as institutions can have with these perpetual contracts.
01:30Well, I know with the crypto perpetual contracts, they trade 24-7, as does crypto.
01:35And that's one of the appealing things for this.
01:36For now, you're just matching the underlying market, which trades 24-5, so only five days a week.
01:41Could that change, Udesh?
01:44Yes, we wanted to start off with basically matching it to the underlying markets.
01:49There's a lot of things happening in the financial sector today.
01:53There are many other markets that are moving from weekdays to weekend trading or potentially move from daytime trading to
02:0223-5.
02:02Our thought process was that we want to start with a 23-5 or 24-5 market and then see
02:09how it goes.
02:10I think eventually we have seen the power of both perpetuals as well as prediction markets to provide for a
02:17lot of price discovery over the weekends.
02:21And as the market grows in the underlying sectors, whether it's futures or traditional futures or cash, we will surely
02:29look at expanding it to 24-7.
02:31It's a market that we've seen a lot of pushback from your entrants and others.
02:37Traditional exchanges like CME have really started to push back on prediction platforms, trying to expand into what they see
02:44as their territory, but more traditional-type futures.
02:48Udesh, how do you see that pushback?
02:51And does that translate at all to things like CFTC pushback?
02:55Is it harder to pass regulators when you are encroaching right on the doorsteps of more traditional exchanges?
03:02Well, our thought process is that we are not necessarily going for the market that looks at dated contracts with
03:09these products.
03:10We are not looking for those constituents who like specific spideys in the future because that's not what perpetuals offer
03:18you.
03:19Perpetuals offer better pricing.
03:21If you look at a price of a perpetual on any, whether it's a crypto or any other asset class,
03:26compare it to the cash market or the spot market price, you will see that they track much closer because
03:32of things like funding adjustment and so on and so forth.
03:35They also provide, because of good price matching, they provide for better risk management.
03:40And in addition, because there are no roles, they are much more cost-effective.
03:44So when you make these innovations, obviously, there are incumbents who will look at it, you know, because there's a
03:51lot of fees associated with the roles and others that may potentially be impacted.
03:58But our view is to provide better risk management at a better cost.
04:02And so necessarily we don't think ourselves competing against the traditional products, which will have a demand as well.
04:08There are a lot of use cases like an agriculture company hedging a future date or an airline company hedging
04:16a future cost of oil.
04:17But we are not competing or we are not providing that marketplace at this point in time.
04:22We're looking at purely folks who want continuous exposure at a better price and improved risk management.
04:30Udesha, how do you respond to the broad criticism, which I'm sure you hear lobbed at Kaoshi a lot and
04:35not just you, your competitors, too, that it's the casinofication of everything,
04:38that you're essentially allowing for more risk and more risk specifically along the lines of retail investors that they perhaps
04:45wouldn't have already taken.
04:46And apologies to Rush you here. I got about a minute left.
04:49No, I'm glad that you asked this question because the perpetuals we offer, we should actually have a different name
04:53for it.
04:54We should call it regulated perpetuals. What we are offering, we are not innovating in risk management.
04:59Whatever we are offering perpetuals onshore follow the exact same routine as a traditional futures that trades.
05:06Traditional futures have a lot of leverage. If you look at some of the traditional futures like S&P futures,
05:11they have 15x leverage.
05:12Gold has 20x leverage. Some of our crypto perpetuals, they only have six to eight times.
05:18We also do not do things like order liquidation through the clearinghouse, which is something very consistent with how a
05:24traditional futures manages risk.
05:26So there are many things that I think we need to distinguish between a regulated perpetual and what trades offshore
05:32for a better answer.
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