Demand Derivatives, a creator of what it terms “novel” derivative instruments, and GMEX Group, a provider of exchange and post-trade business technology solutions, have announced they will combine forces to launch what they term a “revolutionary” US-regulated futures exchange, RealDemand Board of Trade (RealBOT), and clearing house, RealDemand Clearing (RealClear).
The new businesses are slated to open in 2019, subject to CFTC and SEC approval, and the two firms claim they will create “unique and complete solutions to problems currently affecting the futures industry”.
Specifically, they argue the exchange’s products will seek to eliminate systemic risk, clear almost instantly, significantly reduce transaction costs, lower fees, and provide a new set of risk-mitigation features to market participants. “Four novel and proprietary instrument designs, cutting-edge technology, and blockchain clearing are expected to leapfrog existing processes,” they add.
The four new instruments are named as RealLimit Futures – which the firms describe as “limited-risk futures contracts (cap a maximum loss)”; RealVol Instruments, which are “realised-volatility futures and futures options (trade risk itself)”; RealDay Options – which are “forward-start daily futures options (hedge event risks inexpensively)”; and RealGlobe Products – which they describe as “global index products (cut costs and control index risk effectively)”.
While the four instruments can be utilised on most underlying assets, the two firms say that the highest volume asset in each of the major asset classes is scheduled at launch; corn in commodities, gold in metals, crude oil in energy, 10-year treasury notes in rates, EUR/USD in FX, and a yet to be named index in equities. Instruments on other underlying assets may be added in the future depending on market demand, the firms add.
GMEX Fusion, live in multiple exchanges across the globe, will power the trading platform to deliver a number of key solution components including the firm’s proprietary ForumMatch centralised matching engine, exchange administration, market data distribution, FIX API gateway, risk management, and reporting and position management, combined with blockchain technology.
“The low latency and cutting-edge technology offered by GMEX make them the perfect partner to advance our goal to bring profound change to the futures industry,” says Robert Krause, chairman and CEO of Demand Derivatives Corp.
Hirander Misra, chairman of GMEX Technologies and CEO of GMEX Group, adds, “[Demand Derivatives’] derivative instrument designs have the potential to substantially reduce risk and dramatically cut costs to market participants.”
The firms add that to “further align interests and share in the success of the project”, GMEX will take a minority equity stake in Demand Derivatives.