Karachi Fintech Startup Raises $6.5 Million Seed Round to Launch Derivative Trading App
By Riaz Haq
Seed Labs, a Pakistani financial technology startup based in Karachi, has raised $6.5 million in seed funding to launch a derivative trading platform. It was founded about a year ago by four young men in their mid-20s: Yameen Malik, Rabeel Jawaid, Zabi Mohebzada, and Ahmad Jawaid, according to Bloomberg reporter Faseeh Mangi .
Seed Labs's first app is designed for decentralized trading of derivatives on commodities, cryptocurrencies and stocks using blockchain technology. Seed Labs is backed by venture money from 9 different countries, including institutional liquidity providers, Alameda Research, Kronos Research, LedgerPrime and others that collectively trade over $28 billion a day, the company said in a statement.
The initial platform planned to be launched later this year will primarily be a Perpetual Swap Trading Exchange. It will allow any trade pair from any asset class to be offered — from commodities, equities, digital assets to pre-IPO stocks. "Right now our target markets are Europe and the Asia Pacific Region. The derivatives exchange is expected to launch in Q3 of this year and is currently undergoing the first round of technical security and penetration testing audits”, says Zabi, according to a report.
Derivatives are contracts whose value derives from something else. They derive their value from price movements, events, or outcomes of an underlying asset. Underlying assets are usually securities like stocks, bonds, index funds, mutual funds, and commodities. Some derivatives track numerical indexes or statistics based on events and outcomes outside the financial realm — like the weather.
Derivative financial products come in different forms and do different things. Some try to secure a future price of a commodity, such as wheat, to help limit the risk of future price increases. Others speculate on future stock price movements to seek a profit. Still others swap currencies and interest rates to gain a comparative advantage. The important thing to remember about derivatives is that without underlying assets they cannot exist.
Fintech trading platforms are beginning to make derivatives trading accessible to non-professional investors.
Silicon Valley-based Robinhood is an example of such as platform that has been in the news recently. The role of Robinhood app is driving up games retailer. GameStop stock price has drawn the scrutiny of regulators at both the SEC and FTC. The fintech-based trading platforms are seen as a disruptive force by the fintech fans and critics alike.
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