1. Introduction to B2C2
Background: Founded in the UK in 2015, B2C2, which is affiliated with SBI Financial Services, a wholly-owned subsidiary of Japan's SBI Holdings, is one of the largest cryptocurrency liquidity providers in the industry and a leader in OTC trading.
[1] Three core businesses: Financial Services, Asset Management, and Biotechnology, Healthcare & Medical Informatics Business, with assets of nearly US$150 billion.
客户：“We don’t have consumers as clients, we only deal with institutions（retail brokers , asset managers, family offices, hedge funds, banks）, who must do a minimum amount of volume per month.” – From Flavio Molendini
Geographical coverage: B2C2 Ltd is the parent company. Services are provided by wholly-owned subsidiaries in the United States, the United Kingdom, Japan and the Cayman Islands (see the figure below), depending on the jurisdiction and business needs of the client.
收益来源：Spread. We make money from that spread, the difference between the buying and selling prices.
II. Acquisition Process
In July 2020, SBI Financial Service, a wholly owned subsidiary of SBI Holdings, acquired a minority stake in B2C2. In September of the same year, B2C2 was added to the “VCTRADE Pro” market maker list provided by SBI VC Trade, a virtual currency exchange under SBI Holdings.
In December 2020, B2C2 submitted the change of actual controller information to Companies House. UK, and SBI Holdings, Inc became the actual controller of B2C2 with more than 75% of the shares;
After the completion of this acquisition, B2C2 will become the cryptocurrency-focused division of SBI Holdings Inc., helping B2C2 consolidate and improve its position in the global liquidity market and expand SBI's influence in the crypto space;
In the Crypto Trading Report released by PWC in 2022, B2C2 surpassed institutions such as Genesis Trading and Jump Trading and was selected as the most popular OCT DESK in 2021.
3. Business and Planning
Background: London is one of the world's largest financial markets, with the largest foreign exchange and commodity trading volumes in the world, which has promoted the rapid development of the market maker system in the UK. Wintermute, GSR and B2C2 were all established in the UK.
Main business: B2C2 mainly engages in two businesses, namely, digital currency block trading (Block Trade) and market making (Market Making). In addition, B2C2 began to expand its derivatives business more than a year ago as a supplement to its important spot trading business:
1) Providing transaction execution services to hedge funds;
2) Provide basic services or design more complex products for companies such as crypto miners, enterprises and wealth management companies that need to hedge risks and cash flow;
3) Through its FCA-regulated subsidiary B2C2 OTC Ltd, it provides UK customers with Contract for Difference (CFDs) products, which predict the rise and fall of cryptocurrency prices and use leverage to make high-risk investments to earn potential net profits.
Business planning: With the acquisition of SBI Holding Inc. in 2020 and the joining of Nicola White (CEO of US) and Thomas Restout (CEO of EMEA) in 2022, B2C2 will gradually expand into traditional business areas while consolidating its position as a leading market maker in the crypto field:
1) The technical team is building an end-to-end institutional-level service system that is currently lacking in the cryptocurrency market;
2) Join the International Swaps and Derivatives Association (ISDA), the Futures Industry Association (FIA), etc.
3) Nicola White stated at the International Swaps and Derivatives Annual Conference held in Madrid in May this year that “B2C2 is considering applying for a SWAP DEALER[1] license in the United States to further expand into the traditional swap trading field.”
[1] The service of buying spot foreign exchange and selling forward foreign exchange of the same currency at the same time in the foreign exchange market, or selling spot foreign exchange and buying forward foreign exchange of the same currency at the same time.
IV. Risks and measures
Liquidity Risk
1) Maintain sufficient balance to meet payment and business operation needs;
2) Use internal margin tools to coordinate positions and margin ratios.
Foreign exchange risk
1) Hedging by matching assets with liabilities and holding offsetting currency exposures
credit risk
1) Avoid cooperation with unregulated exchanges and monitor risk exposure in real time
2) Cooperate with partners with strong capital strength, and require them to provide collateral enhancement and monitor the status of collateral in real time;
Market Risk
1) By hiring a dedicated risk management team, deploying internal risk models, exchange risk prediction models, position management models, etc. to monitor market risks in real time.
5. Core Personnel
The founding team has a background in "development" and "transaction", and the management team comes from well-known Wall Street investment banks and the Big Four accounting firms.
VI. Department Division and Technology
前台（Front-Office）：before and during the trade is called the front office, because it needs to be so fast, we use Java and Rust；
后台（Back-Office）：anything after the trade is the back office (such as reporting, accounting, sending emails, etc.). The back-office is Python and Django[1], REDIS[2], Kafka[3].
[1] Django is an open source web application framework written in Python.
[2] Redis is an open source (BSD licensed), in-memory data structure server that can be used as a database
[3] Kafka is a high-throughput distributed publish-subscribe messaging system that can handle all action stream data of consumers in the website.
7. Team Composition
Considering the revenue scale of B2C2 in the past three years (2021 revenue was £64.5 million, up 270% from 2020), the IT team has always maintained a high staff composition (13-15 people). Even in 2019 when the main business revenue was less than £8 million, the Trader & IT ratio reached 1:6.5;
Sales & Op and Traders have gradually expanded as the business expands, with 11 people in the Sales & Op team and 8 people in the Traders team;
8. Recruitment Positions
9. Configuration Reference
Citadel's front-end business adopts a multi-manager platform system, which means recruiting a large number of PMs. Each PM recruits several researchers according to needs to form a small team, which is relatively independent, internally competitive, and the survival of the fittest according to revenue.
Jump Trading is divided into dozens of trading teams, each responsible for researching, developing, running and maintaining its own strategies, and sharing the company's technical platform and hardware infrastructure. There are four main positions, namely Algo Trader, R&D Engineer, Software Engineer and Data Engineer. Among them, Algo Trader is more comprehensive, not only understands the product but also can do data mining/machine learning, can develop strategies, and can write code; R&D Engineer is mainly a system architect, focusing on the research of low-latency systems; Software Engineer is responsible for conventional software system development; Data Engineer is responsible for processing data from different sources for use by the trading team.
10. Difficulties and Challenges
Stability: Customers do not accept downtime, and the platform must operate in a zero-downtime environment. have to operate in a zero-downtime environment where there can be no maintenance (actually have one hour of maintenance per week, but working hard to reduce that to zero)
Capacity expansion: Customers have extremely high requirements for the platform's performance, and a low-latency, high-response trading environment is very important.
Recruitment: Recruitment for IT positions, in particular, is always one of the last things that the management team has to do. It takes a lot of effort, especially in IT, it takes 100 interviews to hire one.
11. Investment Portfolio
So far, B2C2 has participated in the investment of CoinFLEX and LGO Exchange:
a) CoinFLEX: The world's first physically delivered encrypted digital futures trading platform, a branch of the old British Bitcoin exchange Coinfloor, provides users with a variety of cryptocurrency futures contracts such as Bitcoin, ETH and BCH, with a maximum leverage of 20 times. Update: Due to overdue debts of more than $84 million from "a large individual customer", CoinFLEX has laid off "a large number" of employees from various departments and geographical locations to cut costs and focus on its core business.
b) LGO Exchange: LGO and Voyager will merge their services and products under the Voyager brand, bringing Voyager's brokerage services to Europe. At the same time, European customers will be able to use the European LGO regulatory setting to access Voyage, thereby achieving full coverage of retail cryptocurrency investors in the United States and Europe, providing them with a high-quality experience. Update: Voyager Digital filed for bankruptcy protection proceedings in the United States Bankruptcy Court for the Southern District of New York in early July due to its involvement in the 3AC crash (involving $350 million in stablecoins USDC and 15,250 bitcoins, totaling more than $650 million).
