Over the last month, more than 50 equity, commodity, index, and pre-IPO markets have been listed on Variational. Each of these markets uses crypto-native liquidity sources to offer 24/7 trading of TradFi assets on-chain.
Today, we’re enabling the first TradFi hedging venues integrated with the Omni Liquidity Provider (OLP) to begin improving spreads across a select set of our existing crypto-native perps, and announcing swaps, a new instrument type that will bring TradFi-level liquidity fully on-chain in Q3.
Initial Rollout of TradFi Liquidity in Perps
So far, all TradFi markets listed on Variational have relied exclusively on aggregated crypto-native liquidity. Now that OLP’s first hedging connections to TradFi venues have been finalized, we are beginning to tighten spreads across TradFi perp markets.
We are starting by testing dual crypto-native/TradFi liquidity aggregation in three markets: Gold $XAU, Silver $XAG, and WTI Crude $CL. All three have now had their spreads cut by 20% or more, meaning lower costs for both small and large traders.
Similar spread improvements will be rolled out to other listed TradFi perps over time, with further improvements to execution quality and higher OI limits planned in parallel with swap listings.
Introducing Swaps: An Instrument Designed to Bring TradFi On-Chain
This quarter, our primary focus will be on listing new instruments called “swaps.” Swaps are one of the main instruments that institutions use to trade with one another, and differ from perps in a few key ways:
- Order-of-Magnitude Tighter Spreads: because swaps hedge directly against dedicated TradFi dealer capacity instead of aggregated crypto-native liquidity, they offer dramatically tighter spreads and deeper liquidity than perps, with the gap widening at larger order sizes and lower-volume underlyings.
- Increased OI Limits: we have signed agreements that secure over $1B in OI capacity across swap markets. As OLP integrates with more TradFi partners, these limits will continue to increase.
- Stable Financing Costs: instead of charging variable funding, most swaps have predictable carry costs benchmarked to USD borrow rates (currently ~4.5% all-in), with opportunities to earn dividends.
- Open/Closed Hours: initially, swaps will have open and closed hours mirroring traditional markets ($XAU-SWAP, for example, will be closed for 1 hour each day). We are progressing toward agreements with additional off-hours venues, which will allow OLP to quote swaps 24/7 in the near future.
- Enabled by Variational’s Broker-Like Model: swaps are OTC instruments. They are impossible for CLOB exchanges to offer, and are only enabled on-chain by OLP’s unique ability to act as a counterparty to TradFi dealers.
These swap markets will sit alongside existing perp markets, allowing traders to choose between trading the perp and the swap based on their priorities. For example, when a trader searches “Nvidia,” they will see “$NVDA-PERP” and “$NVDA-SWAP”: if the trader prioritizes 24/7 trading and wants funding rate exposure, they can trade the perp; if they prefer liquidity depth and predictable carry payments, they can trade the swap.
None of this is possible on a CLOB exchange. A CLOB is a matching engine: it pairs one trader’s order against another, and never takes a position of its own. That works for perps, where crypto-native LPs post both sides of the book, but it cuts order book venues off from TradFi liquidity. TradFi dealers don’t stream quotes into public order books; they trade bilaterally, against a counterparty they’ve signed an agreement with. OLP is able to act as that counterparty, which gives Variational access to liquidity sources that CLOB exchanges have no way to reach. This access is what makes on-chain swaps possible, and what will bring every major TradFi market on-chain, at institutional depth, trading around the clock.
What’s Next
In Q3, we will begin listing swap markets alongside existing perps, at a cadence similar to our TradFi perp listings. Beyond that, we will integrate more TradFi dealers to raise OI limits and add off-hours venues to make swaps 24/7 markets.
Swaps are the instrument that will deliver on our long-term vision for Variational: a single cross-margined account spanning crypto, equities, commodities, indices, and currencies that provides the execution quality of a traditional prime broker and the instant settlement of DeFi.
Who We Are
We are a team of 25 seasoned quant traders, engineers, and crypto natives located around the globe.
Variational’s co-founders, Lucas Schuermann @variational_lvs and Edward Yu @edward_yu_var, met as engineering students and researchers at Columbia University before founding their own hedge fund in 2017. In 2019, their fund was acquired, and they became the VP of Engineering and VP of Quant Trading at one of the largest crypto OTC desks.
The remainder of our team brings experience from Google, Meta, Virtu, IMC, Jane Street Capital, and more.
