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As more retail investors look to allocate capital in private assets a new exchange has entered the fray, looking to provide a substitute to traditional financial markets.
Global trading exchange start-up QFEX, founded by two Cambridge maths graduates, launched on Wednesday, aiming to bring high leverage, 24/7 trading of assets to investors.
The exchange, valued at $95m (£71m), has been backed by Silicon Valley investors including venture capital firms General Catalyst, whose portfolio includes Stripe and Airbnb, along with Y Combinator, an early backer of Reddit, and Paul Graham.
The fintech company is looking to dislodge the $100bn global exchange, clearing and brokerage industry through offering a faster, cheaper and ‘fairer’ alternative, with options that other providers are yet to introduce.
QFEX enables investors to trade traditional assets 24/7, a feature previously limited to cryptocurrencies, as well as allowing direct investor-to-investor trading removing brokers whose costs can sometimes be too expensive for everyday investors.
It is also introducing perpetual futures on traditional assets, removing expiry dates and severing the rollover costs, and grants the option for high leverage, an infrastructure modelled after professional trading systems.
Co-founder and chief executive Annanay Kapila, who is also a former high frequency trader at Tower Research Capital, said: “QFEX was built to level the playing field.
“For decades, retail investors have been told to accept limited hours, limited leverage and opaque intermediaries as the cost of participation.
That model made sense when markets were physical and local. It makes far less sense in a digital, global economy.
“Giving retail traders 24/7 access and institutional-grade tools is not about encouraging risk. It is about removing structural disadvantages that were never technological necessities in the first place.”
Built by traders, for traders
Kapila and co-founder Joshua Wharton, who previously worked at hedge fund Citadel, noted that the idea for QFEX was sparked by having firsthand experience with the inefficiencies of traditional finance.
Kapila said: “Private traders and investors are not a sideshow, they’re essential to a healthy market.
“But until now, they’ve only had access during standard weekday trading hours, precisely when many are at work or unable to engage.
“By giving them the freedom to trade on their own terms, and empowering them with better access and tools, we’re helping to build a more inclusive and efficient market.”
Retail investors can often face frustration when dealing with brokers, with issues often stemming from trade execution quality, platform reliability and hidden costs.
By removing the broker, QFEX eliminates the ability to “distort spreads, raise costs or trade against their own customers”.
Yuri Sagalov, managing director at General Catalyst, said: “QFEX is democratizing traditional market participation.
“When Cambridge mathematicians who’ve built systems for Citadel and Tower Research decide to build the exchange layer from scratch, we pay attention. Some opportunities require you to rebuild the entire stack, this is one of them.”
