In a significant move to solidify its position in the highly competitive derivatives trading market, Kraken has made a strategic acquisition worth $100 million. As one of the leading cryptocurrency exchanges, Kraken aims to expand its regulatory footprint in the U.S. by acquiring the Small Exchange, which is licensed by the Commodity Futures Trading Commission (CFTC). This acquisition not only marks a pivotal moment for Kraken’s ambitions to offer regulated crypto derivatives but also reinforces its influence in the world’s largest capital market.
Kraken Obtains CFTC License to Bolster Regulated Derivatives Trading in the U.S.
Acquiring the Small Exchange grants Kraken a Designated Contract Market (DCM) license, essential for designing and operating exchange derivatives within U.S. regulations. This strategic move is set to integrate spot, margin, and futures trading into a single, cohesive system for U.S. clients, marking an industry first that reduces market fragmentation. According to Arjun Sethi, co-CEO of Kraken, the acquisition creates a foundation for a new era of derivatives markets in the United States, bringing these trading aspects onshore and enhancing performance.
The purchase involves a mix of cash and equity, with IG Group receiving $32.5 million in cash and $67.5 million in Kraken’s parent company stock. IG Group, after recording a post-tax profit of £73.3 million from the sale, will retain a collaborative relationship with Kraken, particularly through a product distribution partnership.
Enhancing Kraken’s Global Derivatives Platform
This latest acquisition complements Kraken’s recent expansions, such as the acquisition of NinjaTrader which provides U.S. clients with access to CME-listed crypto futures, and Crypto Facilities, a UK-based derivatives venue regulated by the Financial Conduct Authority (FCA). Together, these platforms forge a comprehensive global derivatives network spanning the UK, EU, and now the U.S., allowing institutional clients to efficiently manage collateral and risk across different regions.
Since its inception in 2011, Kraken has grown to serve over 15 million users worldwide, offering an extensive range of more than 450 digital and traditional assets. With the integration of Small Exchange, Kraken gains essential regulatory flexibility for launching U.S.-listed crypto futures and options, setting the stage to potentially compete with offshore heavyweights like Binance and Bybit.
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What is Kraken’s new acquisition expected to achieve in the U.S. market?
Kraken’s acquisition of the Small Exchange is expected to establish a new generation of regulated derivatives markets in the U.S. By doing so, it aims to reduce market fragmentation and offer integrated trading solutions for spot, margin, and futures markets in a regulated environment.
How does Kraken’s acquisition impact its position against competitors?
With the regulatory flexibility gained through its acquisition of the Small Exchange, Kraken is better equipped to introduce U.S.-listed crypto futures and options. This strategic move enhances its competitive edge against offshore giants like Binance and Bybit, which dominate the derivatives trading landscape.
Why is the regulatory aspect crucial for Kraken’s latest acquisition?
The regulatory aspect is crucial for Kraken’s acquisition because it allows the exchange to offer crypto derivatives under U.S. regulation. This not only enhances trust and transparency but also aligns Kraken with compliance requirements, providing its clients with secure and lawful trading options.
