Deribit F&O

Setting up your Paradigm Account

1

After requesting access through our Paradigm Signup Page, you will receive a Welcome to Paradigm email

2

In your email, click either the macOS or Windows link to download the application

3

Once installed, click the Sign Up link at top of application

4

Enter registration code given in the welcome email, along with all relevant information

5

Accept Terms on next screen

6

Click Get started

Setting up your Desk on Dashboard

1

Log in to your Paradigm Web Dashboard using your Paradigm login credentials

2

On the Desk Management Page, click the Create Icon

3

Search for user names and set desired account levels from the drop-down menu for each member (Account level permissions are explained by hovering over the “?” icon, next to Account Type column)

Product Level Settings

Counterparties Settings

1

Individual product pages appear under Product Management in the left-hand sidebar

2

All settings for each product can be viewed and configured from each individual product page

3

After completing your own internal compliance checks on a counterparty, click the “+” in the top right of Approved Counterparty Settings section

  1. Enter/select counterparty name in the pop-up screen and click Add Counterparty button
  2. Counterparty will be added to the list in your dashboard
  3. Toggle “Trading Enabled” to allow price discovery functionality within chat
  4. Click three dots on the right, to remove or edit counterparty settings
*Note: Each counterparty must add the opposing desk to their own dashboards, in order for a Trade Channel to be opened on the Paradigm application
Product Level Settings

RFQ Settings

1

To edit RFQ settings, select the Options tab within top header

2

RFQ Settings (Maker)

  1. Toggle Maker Functionality on/off to allow your desk the ability to respond to RFQs
3

Manual RFQ

  1. Edit RFQ settings separately for each product by using the Product dropdown. Select Edit for pop-out window to set Max Size and Execution Window for each product
  2. Use the Toggle functionality to enable/disable Manual RFQ at any time
*Currently Maker Functionality and Manual RFQ will toggle together.
Product Level Settings

Account (Generating and Adding Deribit Credentials)

1

Log into your Deribit account

2

Go to My Account and click the API tab

3

Click Add a new key

4

In the pop-up window, the block trade field must be set to “read_write” while everything else can be personal preference

*Note: This is a new setting made available by Deribit, specifically for block trades. This key will not give us access to your account information. Instead, it only allows Paradigm the ability to submit block trades on a user's behalf.
5

Click Add a new key

6

On your Paradigm Admin Dashboard, select the Account tab under the Deribit Options product

  1. Input your Deribit API credentials i.e. Access Key and Access Secret
7

Click Save

Creating a New Group (no RFQ functionality)

1

Click the create icon at the right of the Search Bar

2

Select New Group from dropdown

3

Type in a desired name for group

4

Enter/select all users for group

5

Click Create

6

You will see the group created and appear within the right hand sidebar list

7

This group is merely for communicating (no RFQ functionalities)

Creating a Trade Channel (includes RFQ functionality)

1

Click the create icon at the right of the Search Bar

2

Select New Trade Channel from dropdown

3

Search for desired Counterparty Name

  1. For a counterparty to appear under Approved, both counterparties need to add each other to their Approved list in their Admin Web Dashboard
4

Select the counterparty name

5

Click Invite button

6

You will see trade channel created in right hand side menu

  1. All members of your trading desk as well as the counterparty’s trading desk are added to the Trade Channel
7

By default a DO Put button is created in the channel ribbon. This is where all future trade buttons will show.

Adding Options Button

1

In the Trade Channel, click the “+” icon

2

Select intended product from drop-down

3

Pop-up window will open with following fields, to review or configure

  1. Venue: DBT - Deribit
  2. Product: DO - BTC Options - European or EH - ETH Options - European
  3. Strategy: Call, Put or Stangle
4

A Strategy Syntax Example populates below for reference

5

Click Add

6

The Trade Button will be added to your channel’s ribbon

7

Trade Buttons can be created for different strategy/product combinations

Sending an Option RFQ

1

Click Trade Button to populate the syntax for the selected strategy in the text window

2

Edit the syntax to create the desired RFQ parameters

3

The typed RFQ text should match the accepted syntax for each strategy.

4

Send the message by clicking Enter

5

User may also manually type the RFQ instead of using the Quick Button, but must follow the syntax rules as described above

6

Text will be converted to an RFQ message and sent to the counterparty, visibile in the chat (via TradeBot)

7

You can cancel your RFQ by clicking the “Cancel” button (or “Re-price” once expired)

Responding to an RFQ

1

Upon receiving the RFQ, Maker clicks the Quote button

2

Quoting syntax will appear in the text window below

3

Type your two way market (with ”/” between bid and offer)

4

Your market will be displayed (via TradeBot) in the RFQ section with a countdown timer (this can be adjusted on the Admin Web Dashboard)

5

If the RFQ counterparty does not interact with your quote by the timer’s end, your quote will expire and become inactive

6

Anyone on the Maker Desk can cancel the Maker quote by clicking the Cancel button

Agreeing on a Price

1

When you agree on a price the party who initiated the RFQ (Taker) can click the Buy or Sell button, before timer completes

2

The Taker will get an additional confirmation pop-up window to confirm the agreement details

3

Once the intended action is clicked in Confirm window, the agreement is complete

4

A Recap of agreement details are displayed via TradeBot within the conversation window for both parties

*Note: Either party can cancel RFQ/quote at anytime before the price agreement is completed by clicking “Cancel” button

Post Agreement Audit Trail

1

Clearing on Deribit

  1. Once an Agreement is complete, details are auto-submitted to Deribit for clearing
  1. For spreads and combinations, Paradigm generates individual leg prices
  1. These prices are displayed on your Blotter under Leg Price column
  2. To view how prices are calculated, please see Paradigm Leg Price Assignment Methodology
  1. Deribit performs order and credit checks before executing and clearing every trade
  2. After these Deribit checks are complete and successful, the block trade will appear in your Deribit account’s Trade History
2

Email Recaps

  1. Automated emails are sent to all members on both Desks of the trade, with full agreement details
3

Blotter

  1. All agreement details are displayed in the product’s Blotter page
  1. Including live settlement status on the respective clearing venue

Leg Price Assignment Methodology

The following section describes the Leg Price Assignment methodology utilized by Paradigm when generating individual leg prices for Spread and Combination trades1.

1

Calculate the Spread Mark Price using Deribit Mark Prices for each leg

2

Calculate Difference = Spread Trade Price - Spread Mark Price

3

If  Difference = 0, there is no remainder to distribute to the legs

  1. Submit Deribit Mark Prices for each leg
4

If  Difference is not equal to zero then Difference is distributed across each leg based on Paradigm’s Leg Price Assignment Rules as below:

  1. Pull Deribit’s price-band for each leg i.e. Min and Max
  2. Calculate distances Mark-Min (Range1) and Max-Mark (Range2) for each leg2
  3. Calculate the individual weights of the relevant ranges (Range1 and Range2) relative to the total available distance
  4. Adjust the Mark Price for each leg in the direction of the Min Price (in Range1) or the Max Price (in Range2) based on the following:
  1. If the Spread Trade Price is greater or less than the Spread Mark Price
  2. The direction of each leg (buy/sell)
  3. The individual weights of Range1 and Range2 for each leg relative to the total available distance
Buy Leg
Condition
Sell Leg
Spread Trade Price > Spread Mark Price
Increase Mark Price towards Max
Decrease Mark Price towards Min
Spread Trade Price > Spread Mark Price
Decrease Mark price towards Min
Increase Mark Price towards Max
  1. Round to the nearest minimum tick size for the given instrument

1 Definitions:

  1. An Options Combination is defined by Paradigm as any multi-legged strategy made up of calls, puts and/or futures
  2. An Option Spread is defined by Paradigm as any multi-legged strategy made up of only calls or puts
  3. A Futures Spread is defined by Paradigm as any multi-legged strategy made up of outright futures

2 Mark-Min and Max-Mark represent the room available to adjust the mark price for each leg based on the direction (buy/sell) of the leg