- Japan’s largest brokerage Nomura Holdings now offers bitcoin-based derivatives.
- The derivatives contracts available are non-deliverable forwards and options, as well as futures and options contracts.
- Nomura Research Institute, the economic consulting arm of Nomura, launched a crypto-asset index in 2020.
Japan’s largest brokerage and investment bank Nomura Holdings Inc. began trading bitcoin derivatives contracts for its Asian clients after an increase in institutional demand “significantly” increased, according to a report. bloomberg,
Tim Albers, head of forex structuring at Asia East Japan, reportedly stated that Nomura will offer non-deliverable forward and non-deliverable options to be settled in cash, as well as bitcoin futures and options contracts, which are explained below.
Nomura’s first business was served by CME Group Inc’s platform with Cumberland DRW LLC as market maker as they specialize in bitcoin and other cryptocurrency based financial derivatives. Nomura interestingly made this trade at a time when many fear an imminent bear market.
“There has been significant volatility recently,” Albers explained. “Once the dust settles, valuations will become more attractive to institutional clients. We’re very excited to get this off the ground,” noting that the offering “marks the beginning of our journey into space.”
Albers explained that Nomura expects the market to “mature” over time as regulators become more involved with the ecosystem, making it more attractive to investors over the long term. “As a result, volatility should decrease over time,” Albers said.
The term non-deliverable refers to the underlying asset, which in this case would be bitcoin. For these derivatives, bitcoin assets are never actually traded. Only the amount invested in derivatives is traded, so the underlying asset becomes non-deliverable and is settled in cash.
Options contracts give an investor the right, not the obligation, to purchase an underlying asset. Forwards create an obligation for the investor to buy or sell the underlying asset, whereas a futures contract is a binding agreement between two parties to buy or sell the underlying asset at a certain price.
“Options enable investors to trade volatility directly and protect against downside risks,” Rig Karkhanis, the Bank’s head of global markets for Asia East Japan, reportedly said in a statement.