Explain the extension of quantification mechanism B2C2 from Crypto to traditional fields

JZL量化研究专题:详解量化机构B2C2从Crypto向传统领域延伸

Overview: sorting out Crypto head quantification mechanism (including traditional cross-border)

JZL量化研究专题:详解量化机构B2C2从Crypto向传统领域延伸

B2C2 Introduction

  • Background:It was established in the UK in 2015 and is subordinate to Japan's SBI Holdings [1] . B2C2 of the wholly-owned subsidiary SBI Financial Services is the largest encryption in the industrycurrencyOne of the liquidity providers; Leader of OTC OTC trading;

  • customer:“We don’t have consumers as clients, we only deal with institutions(retail brokers , asset managers, family offices, hedge funds, banks), who must do a minimum amount of volume per month.” — From Flavio Molendini

JZL量化研究专题:详解量化机构B2C2从Crypto向传统领域延伸

  • Coverage area: B2C2 Ltd is the parent company. According to the customer's jurisdiction and business needs, it is provided with services by wholly-owned subsidiaries (as shown in the figure below) established in the United States, Britain, Japan and Cayman.

JZL量化研究专题:详解量化机构B2C2从Crypto向传统领域延伸

  • Source of income:Spread.& nbsp; We make money from that spread, the difference between the buying and selling prices.


Acquisition history

In July 2020, SBI Financial Service, a wholly-owned subsidiary of SBI Holdings, acquired a small share of B2C2. In September of the same year, B2C2 was added to the "VCTRADE Pro" market maker list provided by SBI VC Trade, a virtual currency exchange of SBI Holdings;

In December 2020, B2C2 will report to the Company House UK submitted the information on the change of the actual controller, and SBI Holdings, Inc became the actual controller of B2C2 with more than 75% equity;

JZL量化研究专题:详解量化机构B2C2从Crypto向传统领域延伸

After the completion of this acquisition, B2C2 became a cryptocurrency focused department of SBI Holdings Inc., helping B2C2 consolidate and improve its position in the global liquidity market and expand SBI's influence in the cryptocurrency field; The Crypto Trading Report released by PWC in 2022, B2C2, which is stronger than Genesis Trading, Jump Trading and other institutions, was selected as the most popular OCT DESK in 2021.

JZL量化研究专题:详解量化机构B2C2从Crypto向传统领域延伸

Business and planning

background: London is the world's largestfinanceOne of the markets, with the largest foreign exchange and commodity trading scale in the world, has promoted the rapid development of the market maker system in the UK. Wintermute, GSR and B2C2 are all founded in the UK;

Main businessB2C2 is mainly engaged in two businesses, namely Block Trade and Market Making. In addition, B2C2 began to expand its derivatives business more than a year ago as a supplement to its important spot trading business:

1) Providing transaction execution services for hedge funds;

Provide basic services for crypto miners, enterprises, wealth management companies and other companies that need to hedge risk and cash flow 1), or design more complex products for them;

2) Through its B2C2 OTC Ltd under the supervision of FCA, it provides British customers with contract for difference (CFDs) products, which use leverage to carry out high risk by predicting the rise and fall of cryptocurrency pricesinvestmentTo earn potential net profits.

ž Business planning: With the entry of SBI Holding Inc. in 2020 and the joining of Nicola White (CEO of US) and Thomas Restout (CEO of EMEA) in 2022, B2C2 will gradually expand into traditional business fields while consolidating its position as the leading market maker in the encryption field:

1) The technical team is building the end-to-end institutional service system that is lacking in the cryptocurrency market at present;

2) Join the International Swaps and Derivatives Association (ISDA), the American Futures Association (FIA), etc;

3) Nicola White said at the International Swaps and Derivatives Annual Conference held in Madrid in May this year that "B2C2 is considering applying for the SWAP DEALER [1] license in the United States to further expand into the traditional swap trading field".

Risks and measures

  • Liquidity risk

1) Maintain sufficient balance to meet payment and business operation requirements;

2) Use the internal margin tool to coordinate positions and margin ratios.

  • Foreign exchange risk

Hedge by matching assets and liabilities and holding offset currency risk exposure

  • credit risks

1) Eliminate cooperation with unregulated exchanges and monitor risk exposure in real time

2) Cooperate with partners with capital strength, and require them to provide mortgage credit enhancement and monitor collateral in real time;

  • market risk

1) By employing a special risk management team, we can deploy internal risk models, exchange risk prediction models, position management models, etc. to monitor market risk in real time.

  • Core personnel

founderThe team has a background of "development"+"transaction", and the management team comes from well-known investment banks on Wall Street and four major accounting firms.

JZL量化研究专题:详解量化机构B2C2从Crypto向传统领域延伸

  • Division and technology


Front Office: before and during the trade is called the front office, because it needs to be so fast, we use  Java  and  Rust;

Back Office: anything after the trade is the back office (such as reporting, accounting, sending emails, etc.) The back-office is  Python  and  Django,  REDIS,  Kafka. Django is an open source program written by Python; Web application framework. Redis is an open source (BSD license), memory stored data structure server that can be used as a database. Kafka is a high throughput distributed publish subscribe messaging system, which can process all the action stream data of consumers in the website.

  • Team composition

Considering the revenue scale of B2C2 in recent three years (the revenue in 2021 will be 64.5 million pounds, up 270% from 2020), the IT team has always maintained a high staff composition (13 – 15 people). Even in 2019, when the main business income is less than 8 million pounds, the Trader&IT ratio will reach 1:6.5;

Sales&Op and Traders gradually expand with business expansion, including 11 members in the Sales&Op team and 8 members in the Traders team;

JZL量化研究专题:详解量化机构B2C2从Crypto向传统领域延伸

JZL量化研究专题:详解量化机构B2C2从Crypto向传统领域延伸

  • Position under recruitment

JZL量化研究专题:详解量化机构B2C2从Crypto向传统领域延伸

  • Configuration Reference

Citadel adopts the multi manager platform system for the front office business, that is, a large number of PMs are recruited. Each PM recruits several researchers as required to form a small team, which is relatively independent of each other, internal competition, and survival of the fittest according to income;

Jump Trading  There are dozens of internal transaction teams, each responsible for researching, developing, operating and maintaining its own strategy, and sharing the company's technology platform and hardware infrastructure. There are four types of positions, namely Algo Trader, R&D Engineer and; Software Engineer and Data Engineer. Among them, algorithm traders are relatively comprehensive. They can not only understand products, but also do data mining/machine learning, develop strategies, and write code; R&D engineers are mainly system architects, focusing on low latency systems; The software engineer is responsible for the development of conventional software systems; The data engineer is responsible for processing data from different sources for use by the transaction team.

  • Difficulties and challenges

Stable: The customer does not accept downtime, and the platform must run in a zero downtime environment. have to operate in a zero-downtime environment where there can be no maintenance (actually have one hour of maintenance per week, but working hard to reduce that to zero)

Capacity expansion: customers have very high requirements for the performance of the platform. A transaction environment with low latency and high response speed is very important.

Recruitment: especially the recruitment of IT posts, is always one of the final things for the management team. It takes a lot of effort, especially in IT, it takes 100 interviews to hire one.

  • investment portfolio

Up to now, B2C2 has participated in CoinFLEX  LGO Exchange  Investment in two centralized exchanges:

JZL量化研究专题:详解量化机构B2C2从Crypto向传统领域延伸a)  CoinFLEX: the world's first encrypted digital futures trading platform for physical delivery, a branch of the British old Bitcoin Exchange Coinfloor, provides users with BitcoinETH and BCH And other cryptocurrenciesFutures contractTrading can provide up to 20 times leverage. Update: CoinFLEX has laid off a large number of employees from various departments and geographical locations to cut costs and focus on its core business due to the overdue debts of "a large individual customer" exceeding $84 million.

b)  LGO Exchange:  LGO and Voyager will combine their services and products with the Voyager brand, bringing Voyager's brokerage services to Europe. At the same time, European customers will be able to use the European LGO regulatory settings to access Voyage, so as to achieve a comprehensive coverage of retail cryptocurrency investors in the United States and Europe, and provide them with high-quality experience. Update: Voyager Digital was involved in the 3AC thunderstorm (involving $350 millionStable currencyUSDCAnd 15250 Bitcoins, totaling more than 650 million US dollars), has applied to the United States Bankruptcy Court in the Southern District of New York in early July to start bankruptcy protection proceedings.

Source:Planet Daily