Simple answer: CME one of the most reputed and US regulated exchange has BTC Futures cash settled and Options on BTC but you have to trade through a FCM futures there is still a risk that a Futures FCM can go belly up like MF Global so IB with a combined account who claim that your cash is covered via SIPC even if it is used for futures or options tradingI've been looking into various exchanges / brokers where I can trade crypto futures and options. My main concern is their possibility of the failure (i.e, bankruptcy). Many exchanges allow customers to trade futures up to 100x leverage. Such huge leverage poses serious threat to the winning traders. In fact, lots of exchanges clearly indicate that the bankruptcy loss would be socialized among the winning traders.
What exchanges / brokers are the safest to trade crypto? IB (CME future) is much safer but its margin requirement is on the other side of extreme (way to high)...
Why is it too high? money is money.. traders don't mind market risk but not this silly risk of exchange itself going out of business ...so WHEN WAS LAST TIME EXCHANGES LIKE cme/ nyse/ lsE, ice, asx OR sgx WENT BELLY UP?I think the level of risk being assessed here is way too high. There are many exchanges that are reputable and have real volume. In fact, TT is offering algorithmic access to some of these exchanges. Any party that has custody of your assets poses a credit risk. I think it makes more sense to look at expectation. Say there's a 5% of chance of total loss (which is very high relative to my estimate for a good exchange), you would need to expect to make a little over 5% to make trading a positive expectation endeavor.
Why is it too high? money is money.. traders don't mind market risk but not this silly risk of exchange itself going out of business ...so WHEN WAS LAST TIME EXCHANGES LIKE cme/ nyse/ lsE, ice, asx OR sgx WENT BELLY UP?
Yes sure Fcms have gone out of business...but not the exchange. where as these unregulated Crypto Exchanges has! So the current solution is 1) Only deal with UK regulated exchanges so you get client money protection of FCA or 2) SIPC covered US broker who offers both Equity/ Futures under one roof
Unfortunately money held at USA FCMs is not covered by SIPC
Likelihood of an exchange going belly up can be guessed up to a certain degree
In places like Seychelles you can start a "Exchange" under 20K
Would you trust them?
or would you trust for example a "Exchange" regulated strict place like Singapore (MAS)
the same argument was used by backers of the dodgy Binary option " Exchanges" scams based in Israel
Argument was if you can make a return 100% n then what bother about exchange viability risk!
Sure one can take any risk in life . I can go and gamble with odds of 1:1000 at an illegal bookie but what if the book one fine day disappears and being illegal I have no chance in hell to get anything back legally speaking
You also mention that " there is a set of exchanges where its fairly safe to keep some amount of money to trade." which? Can you name and in which jurisdiction
Hell I have seen even regulated market maker OTC FX brokers( who act like exchanges) going belly up
Why on earth would anybody take that kind of risk is beyond me .
taking Trading risk sure understand that but taking dodgy broker/ exchange risk.. stupid IMHO
Sure because you have made money you dismiss this risk..
It can be equally said that just before making that money if the so called exchange would have gone burst I am sure your approach be different
My main concern is client money protection..either through broker failure or exchange failure to discount that as a trivial risk is equally not correct!
many people don't even know what the above risk is! as soon as they see the word "Broker" or " Exchange" they think it must be solid.
And although one might make money many times over... but if a broker / exchange is set out to defraud then as soon as you deposit you could loose it with no fault of your own
Re Seychelles... again you are missing my point , I was not talking about registering a normal company for tax effectiveness , I am referring to Finical industry where some regulatory oversight is required to protect the end client
20 K to call them selves as an "Exchange" means lowering the barrier... and not just taht what chances are there that a country/ regulator make it so cheap and easy to start a Fin exchange will have the capacity to oversight such a industry where mom and pop are going to risk their savings!
Ofcourse with 10 million as entry limit a company can set out to defraud but chances are lower