Kraken’s Major Move: Acquiring Small Exchange to Boost U.S. Crypto Derivatives
In a significant development for the cryptocurrency sector, Kraken has made a strategic investment to enhance its regulatory status in the United States. By acquiring Small Exchange, a platform licensed by the Commodity Futures Trading Commission (CFTC) and previously owned by IG Group, for $100 million, Kraken is poised to transform the landscape of regulated crypto derivatives trading.
Kraken’s Acquisition: Building a Regulated U.S. Derivatives Hub
This strategic acquisition endows Kraken with ownership of a Designated Contract Market (DCM) license. This pivotal move empowers Kraken to establish and manage exchange derivatives directly within the United States, unifying spot, margin, and futures products into a cohesive regulated liquidity system. This integration marks a pioneering effort for American clients, setting a new standard in the industry.
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Arjun Sethi, Kraken’s co-CEO, expressed, “Acquiring a CFTC-regulated Designated Contract Market lays the groundwork for an innovative era in U.S. derivatives markets. This advancement bridges spot, futures, and margin products within a unified regulated environment, diminishing fragmentation and bringing the advantages of offshore access and performance onshore.”
The transaction, which involves both cash and equity, sees IG Group receiving $32.5 million in cash and $67.5 million in Kraken’s parent company stock. IG Group reported a post-tax profit of £73.3 million from the sale and will maintain a collaborative relationship with Kraken through a product distribution partnership.
Kraken’s Expansion: A Global Derivatives Network
This acquisition is a part of Kraken’s broader strategy to enhance its global presence in the derivatives market. With previous acquisitions like NinjaTrader, which allows U.S. clients to access CME-listed crypto futures, and Crypto Facilities, a U.K.-based platform regulated by the Financial Conduct Authority (FCA), Kraken is constructing a comprehensive infrastructure. This network spans the U.K., EU, and now the U.S., enabling institutional clients to efficiently manage risk and move collateral in real-time across different regions.
Founded in 2011, Kraken serves over 15 million users globally, offering a diverse range of over 450 digital and traditional assets. By incorporating Small Exchange into its fold, Kraken gains the regulatory flexibility to introduce U.S.-listed crypto futures and options, positioning itself as a formidable competitor to offshore giants like Binance and Bybit.
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