Morgan Stanley Set To Offer Synthetic Bitcoin Derivative Trading

Morgan Stanley, one of the largest investment banks in the world, is set to venture into crypto derivative trading via Bitcoin swaps, according to Bloomberg. The synthetic financial product will be based on Bitcoin Futures.


Morgan Stanley, one of the largest investment banks in the world, is set to venture into crypto derivative trading via Bitcoin swaps, according to Bloomberg.

The reports, published September 13 claim that the U.S banking giant is in the process of finalizing plans that will see it offer Bitcoin (BTC) swap trading based on the Bitcoin Futures market.

The move sees Morgan Stanley join a host of other high profile and leading Wall Street multinationals in exploring digital currencies.

According to Bloomberg, who cited an undisclosed source familiar with the developments, the bank will offer derivatives that give investors “synthetic exposure” to the cryptocurrency market.

The report adds that investors will have options of either going long or short by utilizing a technique called ‘price return swaps’. The source also confirmed to Bloomberg that the bank would charge a given spread for each transaction.

Trading will only begin once the institution is satisfied that there is enough demand for the tool from clients. It will also depend on when the bank completes an internal process seeking approval for the move.

It is a major move for Morgan Stanley, although the bank’s spokesperson was unavailable for comment.

These reports about Morgan Stanley’s foray into crypto come at a time when there has been an increased demand for digital assets by some of the top Wall Street companies and institutions.

One of the first investment banks to announce plans to offer crypto token trading options to its clients was Goldman Sachs.

Last week Goldman Sachs management clarified that its team is fine-tuning a type of cryptocurrency derivative called a “non-deliverable forward”, citing an increase in demand from investors.

According to Martin Chavez, the bank’s Chief Financial Officer, all trades in the above assets will be settled in USD. He added that the reference price would be that of the bitcoin-dollar, as set by selected exchanges.

In addition, Citigroup, yet another U.S banking giant, began realizing plans to make an entry into cryptocurrency. According to insider information, the bank will offer crypto-based trading options using digital assets receipts.

Similarly to what Morgan Stanley and Goldman Sachs will offer, investors in Citigroup’s digital assets receipts will not hold any cryptocurrencies directly. Instead, they will access exposure to Bitcoin markets through what is called non-custodial trading.

The interest that Wall Street is showing towards the crypto industry is quite remarkable, given the miserable year the crypto market had so far.

The leading cryptocurrencies have lost over half of their value since the turn of the year. Bitcoin, which traded at a high of almost $20,000 in December, is now worth at just above $6,400. The rest of the top coins have similar performances, if not worse.

This poor show, punctuated by wild volatility, perhaps is the reason most of the top banking institutions have remained cautious about crypto. It also could be the reason those planning to offer crypto-related products opt for non-custodial options like the bitcoin derivatives.

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