IDG-backed Crypto Derivates Trading KuCoin introduced a platform that offers crypto derivates trading.
The platform which is known as KuMEX will firstly open the Bitcoin Perpetual Contract (XBTUSDM), quoted in US Dollars and provides up to 20x leverage, KuCoin said in a press release. It presently supports only three types of order: limit order, market order, and stop order.
KuMEX wants to form a fair-trading environment and reduce the threshold for investors. It utilizes the Bitcoin Spot Index which offers a volume-weighted average of the U.S. dollar price of bitcoin in mainly six exchanges; these include Coinbase Pro, Bitstamp, Kraken, Gemini, Liquid and Bitrex.
The Spot Index also prevents from user's contract being liquidated, because of the low liquidity of the trading platform or the large price fluctuations of one or two spot exchanges,” the release said.
KuMEX also protects from risk in an insurance fund which is "fully transparent," as the balance is revealed on the platform daily. This fund makes sure that the investors who are forced to close their positions will not lose money once it crosses the position margin.
If the Insurance fund is not sufficient to cover the losses, KuMEX has also built an Auto-Deleveraging (ADL) mechanism, which will help to prevent inflexibility over a settlement in Socialised Loss Mechanism.
To urge new retail investors to take part in crypto derivatives trading, KuMEX is providing a lower investment threshold as compared to other investment providers. KuCoin stated that the XBTUSDM contract value is 1 USD, allowing trades to make a more flexible investment.
“At the same time, KuMEX offers a negative fee for Makers at a rate of -0.025% with a certain amount of fixed commission, encouraging users to provide liquidity to the platform through making the market and earning some commission as an incentive,” adds KuCoin.
Regarding the platform launch, Michael Gan, CEO of KuCoin, stated that derivatives are much riskier as compared to the spot market because of leverage and demand for a more cautious approach.
He said, “KuMEX is a derivative trading platform independently developed by our team, and from its inception, we have positioned it as a genuine and advanced financial product, so that all users can trust the platform and trade on it freely, without worrying about the loss caused by any form of manipulation.”
“Following our crypto-to-crypto and P2P OTC platform, KuMEX's launch complements our ecosystem, allowing us to provide a one-stop service to crypto investors", he added.
When the platform launch is completed, 50% of net revenue from KuMEX will be allocated for distribution to holders of the exchange's token, KuCoin, the press release states.