Paradigm exceeds US$1.5B in derivative trades while closing strategic financing round

Paradigm was founded in March 2018 by Anand Gomes and Sharaf Nassar. Gomes previously spent more than six years in OTC derivatives sales and trading roles across Rates and Commodities at KeyBank. Nassar spent over eight years building fast, real-time web-apps at Neurotrack and Cisco. “After spending hundreds of hours trading and navigating the inefficient, multi-channel nature of traditional OTC markets, we thought to ourselves: there has to be a better way,” states the company website.

Paradigm raised US$1.7M in a seed round in June 2018, according to Crunchbase. Participants included Vectr Fintech Partners, XBTO Group, and RiskEx. This was a year prior to the launch of the Paradigm product.

The company launched its product in August 2019 with the mission to “trade anything, with anyone, and clear it anywhere.” Following the launch, Paradigm announced a partnership with Deribit, a prominent futures and options exchange for Bitcoin (BTC) and Ethereum (ETH).

According to Deribit CEO John Jansen, contracts can be entered into bilaterally and then settled and cleared at Deribit, which also has an insurance fund designed to cover losses from bankrupt traders. Deribit has set a minimum size of 40 Bitcoin and 800 Ethereum for its block trades, or approximately US$400,000 and US$150,000 respectively.

Gomes has stated that ten of the largest crypto trading firms have also signed up for the service, including the likes of QCP Capital and Galaxy Digital.

Nine months after the launch of the product the company has acquired more than 180 institutional clients who have traded over US$1.5 billion in futures and options block trades on Deribit and the CME. Currently, almost all block options trades on Deribit and the CME are traded via Paradigm.

The company recently announced that they have raised an undisclosed sum in a strategic financing round led by Dragonfly Capital. Other participants in the round include Digital Currency Group, OKCoin Ventures, Bybit Fintech, Alameda Research, New York Digital Investment Group (NYDIG), CoinShares, and Yleana Venture Partners. Vectr Fintech Partners also participated in this round.

The lead investor, Dragonfly Capital Partners, is a crypto-specific venture fund founded in 2018 by Bo Feng and Alex Pack. The firm launched with US$100M from investors including global blockchain companies, such as OKEx and Bitmain.

Other well-known technology founders and investors in the fund include Salil Deshpande of Uncorrelated Ventures, Marc Andreessen and Chris Dixon of A16Z, Cyan Banister of Founders Fund, and Olaf Carlson-Wee of Polychain Capital, Neil Shen, head of Sequoia China, Eric Xu, founder of Baidu and many others.

In a blog post announcing the investment, the team at Dragonfly stated, “Anand, the CEO, is one of the most unrelenting and focused entrepreneurs we’ve met. We look forward to supporting Anand and the Paradigm team on their journey to becoming one of the largest liquidity platforms in the world.”

According to the Paradigm team, the investment amount will be used to expand the list of supported exchanges and assets, expand the suite of automated trade execution tools, and grow the company’s presence in Asia.

In a blog post, the team states, “we are excited to welcome our exchange partners OKEx, Bybit, and FTX (via Alameda Research), not only as investors, but as strategic partners. We will be integrating with these venues to add their markets to our platform and bring innovative new trading capabilities to our clients.”

The company also announced the upcoming launch of the second generation of their flagship RFQ product: Automated, multi-dealer request for quote (RFQ) trading.

Source: Paradigm

The new version of this product will provide Paradigms clients with the ability to aggregate liquidity from multiple market makers for custom RFQ structures with the click of a button. This will help users discover the best price for custom or large size trades in one place, with one click.

According to the team, this will bring the platform “on-par with traditional capital market offerings such as TradeWeb and MarketAxxes. It also represents an exponential improvement over the current manual, single-dealer RFQ model and will include the roll-out of our API to both price takers and makers which has been the #1 request from our clients.”

Currently, the Paradigm team is made up of nine individuals who bring experience from various companies including KeyBank, Cisco, Wolverine Trading, Bloomberg, Roomi, and Siemens. The company is looking to hire four engineers with the newly received funding.