Fireside Chat with Gerrit Van Wingerden
On Tuesday, August 28, Caspian Co-Founder and CTO Gerrit Van Wingerden sat down with Kenetic Capital’s John Fiorelli for a wide-ranging discussion about the nature of crypto trading, its future, and the specific opportunities and challenges facing Caspian. The following is an edited summary of the key questions and answers from the session.
You can watch the entire fireside chat here.
What is the value of having a crypto trading platform today?
We see two types of people that set up crypto funds. The first are from a traditional finance background, who previously may have run an equity, FX or fixed income fund. The second are the “amateur quant/crypto experts” who entered the space early and probably did quite well. These people tend to be fairly technical, often building bots to help them trade. Each group suffers from its own misconceptions about what it takes to set up a crypto fund.
The latter may have a very solid grasp on crypto and on exchange connectivity. However, when they approach an external investor, they will be faced with a lot of questions about track record, audit capabilities, compliance modules, which functionalities are not generally available on existing crypto exchanges. This lack of a robust auditing and compliance capability is going to make institutional investors pass on the opportunity.
Those coming from a traditional finance background often tend to underestimate the difficulty in establishing connectivity to all the exchanges. People tend to think they can write to a common API and everything will work, but in crypto, exchanges often have their own separate APIs that may not be as easy to be connected.
Caspian addresses the problems faced by those coming from these two backgrounds. For those from a traditional background, it provides unified access to all the major exchanges, including decentralized exchanges. For the crypto expert, Caspian also provides a compliance system and allows them to put checks on their trades. This functionality will become more important as the space becomes more regulated. We are addressing the needs of everyone coming into the space who wants to establish a fund.
What additional challenges are faced by funds managing outside money, and how does the trading platform help with that?
The biggest challenge managers face is getting potential investors — fund of funds, pension funds, sovereign wealth funds, etc. — to the point where they can check off every box in their risk matrix. Security, compliance, recordkeeping, even things like best execution. Caspian provides all of that.
Caspian is backed by Tora, which is a cloud based, global provider of advanced investment management technologies supporting the full trading lifecycle. Seventeen percent of all Japanese institutional volume passes through Tora’s system, and our clients trade every market on the planet. I have always wanted to add crypto as an asset class to the platform. Our partners at Kenetic know the crypto space very well and we know the traditional asset space very well, so we’re not starting from scratch. We’ve been doing this for many years. We’ve reengineered the system to enable crypto as an asset class, supplementing a framework that is tried and proven.
Let’s say I’m managing a large trading desk of 15 people. What am I missing if I don’t have Caspian?
One of the big things is compliance. You could try to build a system everyone trades through, but then you have to reinvent the wheel. You could also let them trade through web interfaces, but there you find problems such as the fact that some exchanges only allow one person to be logged in at a time. The other problem is you can’t control what they’re doing.
With Caspian, you can have a view of every trader on every desk on every continent within your fund. That’s something that doesn’t exist elsewhere and that would be very difficult to build from scratch.
What are the core components of an effective trading platform?
We believe there are three core components of an effective trading platform. The first is an Order and Execution Management System (OEMS), which routes your orders to the exchanges via a unified API, allowing you to trade and manage your orders efficiently. It also helps with throttling, allowing you to place multiple trades at once. Second is the compliance engine, which allows you to manage and set limits around trading, and to meet increasing regulatory requirements. This enables you to abide by rules set by the regulators and also by investors. Caspian allows you to set parameters ensuring you never exceed such limits. The final component is a system of books and records, or a Portfolio Management System (PMS). This enables you to track all your transactions and allows you to see your profit and loss over any period.
How can a platform like Caspian help exchanges bring institutions into crypto?
We would like to work with exchanges to fine tune our algos, and perhaps make some recommendations about possible API enhancements that would make it easier for institutions to interact with exchanges.
Could platforms potentially reduce loads for exchanges?
Some exchanges offer batch APIs, which can be difficult for people to write to, which results in batch APIs being under-utilized. There is a possibility to aggregate orders using batch APIs and potentially reduce loads on exchanges.
What can I do to prepare my fund to work with Caspian?
Just sign the business agreement and we’ll take care of the rest. We will work with you via our professional services team to understand your needs and then set you up.
What challenges have you faced in managing private key security?
The first question every client asked us was, “what do you do with API keys?” Sot we built a service that hosts all the API keys. When our backend needs to make an API request, it authenticates with the service. The service then signs the request, passes it back to the backend, and the backend makes it to the exchange. This allows us never to have to take custody of our customers’ API keys.
How do you see this tool changing the market?
When tools like Caspian exist and you have savvy crypto fund administrators, then I think we’ll see sovereign wealth funds and other institutions allocating a portion of their portfolios to crypto. And when that happens, prices are going to the moon.
Where is the learning curve with Caspian for someone that has used Tora?
The colors and icons are different, but fundamentally if you know Tora you know Caspian.
Caspian is a full-stack cryptoasset management platform tying together the biggest crypto exchanges in a single interface, so as to facilitate investments in crypto instruments for newcomers and veterans alike. The joint venture between heavyweights Tora and Kenetic brings to the table a wealth of experience in asset management, accumulated over decades of building and operating trading platforms and technologies.
We’d love to hear from you. Please leave a comment or chat us up on Telegram. If you want to learn more about our platform, please visit us at caspian.tech.
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