IDG-backed cryptocurrency exchange KuCoin has just launched a platform offering crypto derivatives trading.
Announced Monday, the KuMEX trading venue is now live in public beta and will offer initially a bitcoin perpetual contract (XBTUSDM), quoted in U.S. dollars, with up to 20x leverage.
Aimed to make pricing “more fair and rigorous,” KuCoin said, KuMEX uses a bitcoin spot index providing a volume-weighted average of the U.S. dollar price of bitcoin across six exchanges: Coinbase Pro, Bitstamp, Kraken, Gemini, Liquid and Bittrex.
The spot index also avoids a contract being liquidated “because of the low liquidity of the trading platform or the large price fluctuations of one or two spot exchanges,” the exchange explained.
KuMEX offers some protection from risk with an insurance fund it says is “fully transparent,” with the balance to be disclosed on the platform each day.
“This fund ensures that investors who are forced to close their positions will not lose money that exceeds their position margin,” according to the announcement.
Should the insurance fund turn out to be insufficient to cover losses, KuMEX also has an “auto-deleveraging” system, said to be less “inflexible” than settlement via more standard socialised loss mechanisms.
To encourage new retail investors to get involved with crypto derivatives, KuMEX is offering a lower investment threshold than found at some other providers.
“The XBTUSDM contract value is 1 USD, which enables traders to make a more flexible investment. At the same time, KuMEX offers a negative fee for Makers at a rate of -0.025% with a certain amount of fixed commission, encouraging users to provide liquidity to the platform through making the market and earning some commission as an incentive,” says KuCoin.
KuCoin CEO Michael Gan said:
“Compared to the spot market, derivatives are much riskier due to the leverage used, so we are more cautious in providing such services. KuMEX is a derivative trading platform independently developed by our team, and from its inception, we have positioned it as a genuine and advanced financial product, so that all users can trust the platform and trade on it freely, without worrying about the loss caused by any form of manipulation. ”
After the full launch of the platform, 50 percent of net KuMEX revenue will be assigned for distribution to holders of the exchange’s token, KuCoin, the release states.
Last November, the Singapore-based exchange raised $20 million in Series A funding from investors including IDG Capital, Matrix Partners and Neo Global Capital.