UK-based institutional traders now have access to crypto derivatives trading through Kraken platform.
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Crypto exchange Kraken recently dropped a bombshell by introducing crypto derivatives trading for the UK's "Professional Clients." According to the Financial Conduct Authority (FCA), derivatives trading accounts for approximately 70-75% of the global crypto trading volume, making this move a significant leap for Kraken.
Kraken: Leveling Up Derivatives Trading in the UK
Kraken's entry into the UK derivatives game will open crypto futures and options for professional clients residing in the UK via multi-collateral perpetual contracts. These trades will be facilitated through an FCA-regulated Multilateral Trading Facility (MTF) run by Crypto Facilities, a subsidiary of Kraken that the exchange acquired in 2019.
Pros:
- FCA-Regulated MTF: Ensures a compliant environment for advanced crypto trading
- Innovative Contracts: Multi-collateral perpetuals maximize capital-efficient trading
- Institutional Spotlight: Kraken focuses on regulated derivatives to cater to banks and sophisticated traders
Cons:
- Professionals Only: Kraken's services are limited to qualified professional clients meeting the FCA's criteria
- Licensing Hurdles: Kraken needs to navigate region-specific limitations in other markets
Join Kraken now to get started!
Understanding Crypto Derivatives: A Deep Dive
Before diving deeper, let's define crypto derivatives. These instruments derive their value from underlying cryptos, such as Bitcoin or Ethereum, and are commonly available in the form of futures, options, and perpetual swap contracts. Traders often employ derivatives to:
- Leverage Up: Amplify gains—and risks
- Hedge: Manage volatility by locking in certain prices
- Execute Market-Neutral Strategies: Profit from volatility no matter the market direction
Crypto derivatives have gained popularity due to their ability to accommodate both speculative and risk-averse strategies.
Kraken UK Derivatives Platform: Shining a Light
Kraken's UK derivatives service is powered by Crypto Facilities, an FCA-licensed MTF. This partnership ensures all trades comply with regulatory requirements—an attribute that's especially appealing to banks seeking a legally compliant exposure to crypto.
Trade execution is handled by Kraken's Bermuda-regulated futures brokerage. Unlike standard futures that generally require a single form of collateral, Kraken accepts a wide variety of assets, including Bitcoin, Ethereum, USDT, USD, and others—maximizing capital efficiency.
Kraken's Institutional Ambitions: A Worldwide Perspective
Kraken's aspirations extend beyond the UK market. The exchange is making strategic moves that demonstrate its commitment to becoming one of the premiere crypto exchanges for institutional clients worldwide:
- Cyprus MiFID II Acquisition: This acquisition positions Kraken for an EU-wide expansion as the Markets in Crypto-Assets (MiCA) framework comes into effect.
- NinjaTrader Purchase in the U.S.: This acquisition indicates a movement towards bridging traditional and crypto futures for American traders, although U.S. regulations remain complex.
- Region-Specific Licensing: Kraken is strategically securing licenses in every major market, from Europe to Asia, as derivatives face more stringent oversight compared to spot trading.
This further solidifies Kraken's position as a destination for institutional clients seeking advanced trading tools within a compliant framework.
Why Kraken Stands Out in the Derivatives Landscape
Not all crypto exchanges provide derivatives, but Kraken sets itself apart for several reasons:
- FCA and Global Compliance: Kraken emphasizes compliance in every market to reduce legal uncertainties.
- Strong Institutional Infrastructure: A high-volume order matching system, advanced APIs, and minimal downtime make Kraken an attractive platform for large-scale traders.
- Innovative Product Lineup: Multi-collateral perpetuals let users maximize capital flexibility—a feature that only a few competitors are currently offering.
- Strategic Acquisitions: Moves like the NinjaTrader acquisition demonstrate Kraken's intention to bridge traditional finance and crypto.
Navigating the UK's FCA Crypto Regulations
In the UK, the FCA divides users into two categories: Retail Clients and Professional Clients. Retail Clients receive more protections but are restricted from accessing high-risk products like crypto derivatives. To qualify as a professional client, entities or individuals need to meet stricter criteria, typically involving larger trading volumes or financial resources.
See the FCA's Professional Client Criteria Guidelines for more specifics on the qualification process.
Implications for UK Institutional Crypto Traders
With Kraken, institutional players or professional clients have gained access to crypto derivatives trading in the UK. By leveraging the regulated MTF run by Crypto Facilities, they can delve into Kraken futures trading or other derivatives.
While retail traders are still left out, future policy changes could widen the door for wider access to derivatives trading—similar to what we've witnessed in other financial markets over the years.
To start trading derivates on Kraken (UK users):
- Prove Your Worth: First, confirm you meet the FCA's definition of a "Professional Client." This involves meeting experience and financial thresholds.
- Register and Verify: Sign up on Kraken, request Professional status, and provide the required documents.
- MTF Access: Once approved, you'll gain access to the FCA-regulated MTF run by Crypto Facilities.
- Go Live: You're now ready to access Kraken derivatives trading (multi-collateral perpetual contracts) under a regulated environment.
Kraken's Future Ambitions
Kraken's ultimate vision is to bring together digital and traditional assets into a single platform. In 2024, the exchange hauled in $1.5 billion in revenue and is rumored to be considering an IPO. The platform has already launched stock trading and ETFs in select US regions, hinting at a broader plan to become a full-service financial hub embracing both crypto natives and traditional investors.
Join Kraken now to stay ahead of the curve and prepare yourself for the new wave of crypto trading!
- The introduction of crypto derivatives trading by Kraken for UK's professional clients, facilitated through an FCA-regulated Multilateral Trading Facility (MTF), signifies a significant leap for the crypto industry.
- In 2024, Kraken is projected to generate $1.5 billion in revenue, hinting at the exchange's future ambitions to become a full-service financial hub, bridging digital and traditional assets.
- Crypto derivatives, such as futures, options, and perpetual swap contracts, have gained popularity among traders due to their ability to accommodate both speculative and risk-averse strategies, providing capital efficiency and hedging opportunities.
- Kraken focuses on regulated derivatives to cater to banks and sophisticated traders, with their UK derivatives service powered by Crypto Facilities, an FCA-licensed MTF, ensuring all trades comply with regulatory requirements.
- Navigating the UK's FCA crypto regulations, institutional traders or professional clients need to meet certain criteria, such as larger trading volumes or financial resources, to qualify as a professional client and access derivatives trading.
