UTEX crypto exchange now offers a new type of assets for trading — futures on the common stock of private companies that don’t yet trade on the public market. The tests we have been running so far proved successful. So today we are pleased to present a new milestone: the new instrument that has no equal among trading platforms.
For whom we launched this product
The new instrument is ideal for experienced investors.
For “experienced” because:
- you need to have a strong skill of placing limit orders;
- you know how to come up with your own idea of a fair futures price at any moment;
- you understand the risk of a futures contract and a futures portfolio;
For “investors” because:
- at the early stage, we have set a commission that is not suitable for making a large number of deals. It is higher than the standard commission on UTEX and is 3% of the deal’s amount or 1.5% if UTT tokens are your commission payment option.
Let’s look at how futures work by using Airbnb pre-IPO as an example.
Trading start and market making
In early 2020, futures on Airbnb stocks became available on UTEX. The users of the platform could now trade it. The initial volume of sell offers and the initial futures price are set by a market maker. He or she is guided by publicly available information about trades with a private company’s stocks on the over-the-counter market. For example, as of the beginning of 2020, before Airbnb went public, its share price on the OTC market was approximately $30.
This price serves as a "reference point" for futures quotations. The final trading point is Airbnb IPO, and this date is not known in advance. Futures trading on UTEX continues until the company goes public or another significant event occurs.
Deals among participants
Over the course of several months, UTEX users make transactions, buying and selling the futures at prices they deem to be reasonable. The price of the futures depends solely on UTEX users. Every user places buy or sell orders, independently estimating what the IPO price of Airbnb stock might be.
A market maker can sell an additional volume of asset on UTEX if its price has considerably gone up, or, on the contrary, buy it if the price has plummetted. In this way he maintains trading liquidity: UTEX users can at any time access a sufficient volume of futures at various prices both to buy and sell.
Trading ceasing scenarios
On December 10, 2020 Airbnb went public. On that day, we stopped futures trading in the company's stock and automatically sold all the futures in our users’ accounts. The sale price was equal to the IPO stock price — $60.8. The difference between this price and the price at which the user bought the futures is his or her profit (or loss). After the settlement with all users, trading in this asset ceased.
IPO is one of the possible scenarios. For example, a company may choose to list its shares directly on an exchange, may get acquired by a SPAC, or merge with another company.
UPD: We have moved the expiration date of futures contracts in the event of a company’s IPO or direct listing to the 200th day of the offering.
In any scenario the final settlement with users is made at the price of a company’s common stock within a certain event. We draw the information on prices from publicly available and official sources.
Airbnb and other companies that hold an IPO and increase their capitalization (and therefore their stock price) represent success stories. But some negative scenarios can happen to. For instance, if a company at the pre-IPO stage goes bankrupt. In this case its futures will be sold for $0 or at a higher price if this company’s stakeholders receive compensation in the event of its assets getting split up.
Be aware of negative scenarios and consider all the risks involved in futures trading before you make your decisions.
Short and long positions
Short position opening is available only to a market maker. Every market maker has common stock on his balance sheet — he participates in trading these stocks futures on UTEX. The size of a market maker's short positions on UTEX cannot exceed the size of the shares he has at his disposal.
We are working hard to increase the number of market makers and liquidity. As soon as we see the liquidity is enough to provide risk control, all UTEX users will be able to open short positions.
Any UTEX user can place market and limit orders to buy and sell futures on his first day of trading.
If you’re ready to add pre-IPO futures to your portfolio, the new instrument will become a great addition to you on the unitedtraders.com platform that provides access to investments in private companies at the pre-IPO stage. Let’s go through the main advantages of futures deals on UTEX:
Low commissions. Zero success fee on your investment. The unitedtraders.com platform charges you a 20% success fee.
Best prices. The unitedtraders.com platform allows you to enter and exit investments only at the prices we set and recommend. This insures beginning investors against losses, however, it also prevents advanced investors from getting extra profits in the event of abrupt price changes. Depending on the market situation, futures let you invest in private companies at reduced prices and close out at better ones.
In stock at all times. Sometimes the stocks of some company may be unavailable on unitedtraders.com. The futures on this company’s stocks can always be found on UTEX. You can also offer your own price here by placing a limit order.
Buy for cryptocurrency. UTEX lets you without restrictions deposit your account with any available cryptocurrency, exchange it for dollars and buy pre-IPO futures.
Currently, the stocks of 12 pre-IPO companies trade on UTEX: Ginkgo Bioworks, Automation Anywhere, Coursera, Exabeam, Cohesity, SpaceX, ThoughtSpot, Algolia, DigitalOcean, Impossible Foods, Flexport, and Chime Financial.
We will add new futures regularly — we are constantly looking for fast-growing companies that can go public within 1-3 years. We are also looking for market makers that can provide liquidity.
Follow our blog UT Media and UTEX channel in Telegram for the latest news.
We wish you successful trading!