We see a real push for expanded D5 processes as well as trading products across centralized crypto exchanges and trafi exchanges.
Now RWA tokenization is booming in the form of tokenized stocks while perp features are expanding beyond crypto and into stocks, commodities and indexes.
These derivative contracts don't have an expiration date, and they are allowing investors to hedge.
Cast positions or speculate on market reactions over the morning while financial stocks are closed.
We've also even seen exchange operators like CBO move into predictions, allowing investors to speculate on where the S&P and the trading day while a key part to this expansion are US regulators, agencies like the CFTC, FDIC, and SEC approving new.
Products for centralized exchanges to launch while joining us to break all of this down as CEO and founder of Arcus, a decentralized exchange built in partnership with Robinhood. and good morning.
Thank you so much for joining us first and foremost with tokenized stocks taking off, explain to us how overseas investors are helping to drive 24/7 demand for US markets.
Definitely.
So, what we offer is stock and perpetual trading.
The stock trading is stock tokens backed by Robin Hood's liquidity.
So what's happening is access to American stocks internationally is often restricted as well as people take fees and so we don't take any fees on stock trading.
And it allows international users to access stock tokens through Robinhood's uh book and liquidity, which creates really strong price and size.
Uh, so what they're doing is essentially speaking, decentralized wallet users can go through our front end, request a stock token like Nvidia that moves through a market maker, which fulfills the order through Robinhood's infrastructure, and then we deliver the stock token to the user.
And I do want to get your take on PERP.
So tell us how, as well as why PEP features are expanding beyond crypto and into tradfi staples like equities as well as commodities and even indexes.
Definitely.
I think the first inflection point was certainly around commodities, so oil, gold, silver.
Oil especially traded uh because it was available on the weekend.
So, given the war earlier in the year and the effect on oil prices, since a lot of the news that hit about the war happened over the weekend, there wasn't any place to trade oil in either a spot or a derivative form except for on decentralized exchanges.
So that was a catalyst I believe in the spring in Q1.
And I think that convinced people that it was really valuable to have 24/7 access to products and so when you have spot versus derivatives like perpetuals on the spot side, uh, issuance is closed over the weekends, so Market makers are maintaining availability by holding the stock tokens, uh, and market making them over the weekend, but perpetuals, since they are pegged to a different mechanism, can use the same liquidity for any perpetual.
And so what users are doing is if there's like a sudden spike in like oil or gold or something else over the weekend, it's easier to move.
Liquidity into the perpetual than it is in the spot position because if you didn't hold the spot over the weekend, if you didn't buy the stock tokens on Friday and market closed and manage the position, then you can certainly run out of liquidity, whereas for a perpetual sense, it's a derivative product uh denominated in US dollars or quoted in US dollars, you can maintain much higher liquidity, um, over the weekends.
Yes, and in New York morning trade, we're continuing to monitor crude oil prices this morning.
We're looking at WTI as well as Brent futures higher as geopolitical tensions in the Middle East continue to be front and center.
But when we're talking about stock tokens as well as equity perps being combined into one trading account, what does this actually mean for retail investors?
Definitely.
It means that typically we take collateral for perpetual trading in US dollars or USTC USDG.
But allowing for stock tokens as collateral means that you essentially can get higher depth because what's happening is the way perpetual works is people borrow to go long or go short and there can be imbalances.
Uh, retail users typically prefer going long and so you can balance it out by having people buy the underlying asset and then going short, which makes both sides of the market deeper because people are providing liquidity and therefore you get better prices and better fills.
So that's what we really see as really powerful.
Um, is allowing for stock tokens to be deposited as collateral for the perpetuals, so you can balance out the short and the long interest on the perpetual side while holding the underlying token and effectively not being exposed to price risk since you're delta neutral.
And Eddie, very quickly before I let you go, tell us about your partnership with Robinhood and Robinhood Chain.
What is Arcus doing here as a decentralized exchange?
Definitely.
So we took an investment from Robinhood Crypto.
Uh, Robinhood's like main energy.
As a part of that agreement, we were a launch partner for Robinhood Chain, uh, on July 1st when they launched Robinhood Chain.
And as a part of that, what we have is a liquidity agreement provided by Robinhood on stocks.
So, there's liquidity uh on stock tokens that comes from Robinhood directly, uh, Perpetuals, the exchange on the derivative side we built entirely in-house.
Uh, we built the dynamics for exchanging the spot tokens, the stock tokens from Robinhood, as well.
But those are I think the major factors is they invested and to have kind of like a co-marketing moment as like a launch partner as well as providing liquidity for actual assets which then we are able to provide as a good feature for users everywhere around the world.
Um, that also allows us to do 0% fees because our perpetual Product test fees, so we make our revenue from perpetuals and derivatives while the stock tokens, we believe as a way to onboard many people internationally to American equities since um there is a lot of demand there.
American growth has been higher than international growth for the last time period, the last 10 years, and so we've seen definitely like a really synergistic effect from the partnership with Robinhood.
Well, Eddie, we will have to leave it there for today, but thank you so much for joining us and thank you so much for sharing your insights as well as your perspective.
Appreciate it.
Thank you.
Thank you for having me.
