Unveiling Flow Traders: The Secretive Traders and the Increasingly Active Crypto Investment Institution

Written by: Zen, PANews

It has become a trend for liquidity providers to also act as investment institutions. Recently, the market maker DWF Labs has attracted attention with its frequent investments, and trading firms such as Jump, Wintermute, GSR, and Alameda have also actively participated in project investments and incubation. Another low-profile traditional trading firm, Flow Traders, has also frequently appeared on the list of project investment institutions.

Flow Traders is a global digital liquidity provider focused on exchange-traded products (ETPs), founded in 2004 in the Netherlands. It is one of the largest ETF trading companies in the EU, primarily providing trading services in stocks and derivatives, currencies, and bonds. It has also created exchange-traded certificates based on Bitcoin and Ethereum, engaging in cryptocurrency ETN trading. The company has offices in the Netherlands, Singapore, the United States, Hong Kong, and Romania, and last year obtained a Qualified Foreign Institutional Investor (QFII) license in China, as well as approval to establish a representative office in Shanghai.

Flow Traders began engaging in cryptocurrency trading in 2017, with its subsidiary registered with the Dutch central bank to facilitate the exchange between crypto assets and fiat currency. Flow Traders connects to multiple leading exchanges globally, covering various asset classes and using these asset classes to offset trading risks. Although cryptocurrency trading activities account for only a small portion of the company's overall business, they have had a "positive impact" over the years.

Trading Company Originating from the Netherlands

During the Age of Exploration, the world's earliest securities trading market was born in Amsterdam, Netherlands, where modern finance began to take root, leading to a relatively developed financial market in the country.

More than 20 years ago, stock traders Jan van Kuijk and Roger Hodenius worked together at the Amsterdam trading company Optiver. Roger Hodenius gained a reputation for his outstanding trading record, prompting him to venture out on his own and collaborate with like-minded Jan van Kuijk to establish Flow Traders in 2004. The company later went public on the Euronext Amsterdam exchange in 2015. The two founders, both from trading backgrounds, are quite low-profile and rarely appear in the media. After the company's IPO, they had already partially cashed out and exited specific company affairs, currently serving as non-executive directors while still holding over 20% of Flow Traders' shares, remaining major shareholders.

Today, Flow Traders' executives come from traditional finance and consulting backgrounds. Current advisor Dennis Dijkstra joined Flow Traders in 2009 as Chief Financial Officer and was first appointed as Co-CEO in January 2014, later becoming CEO in May 2019. Before joining Flow Traders, Dennis held multiple positions at one of the original "Big Five" accounting firms, Arthur Andersen, and at the Dutch NIBC Bank. On February 1 of this year, Dennis handed over the CEO responsibilities to Mike Kuehnel and remained as an advisor until the end of April 2023.

Left: Dennis Dijkstra; Right: Mike Kuehnel

Current CEO Mike Kuehnel joined Flow Traders in August 2021 and was confirmed as a member of the management board and Chief Financial Officer the following month. Mike has over 20 years of experience in investment banking and strategic consulting. Before joining Flow Traders, Mike was a partner at Bain & Company, leading investment banking and financial market infrastructure businesses in Europe, the Middle East, and Africa. Prior to that, he worked at Goldman Sachs, providing advisory services for large equity and merger transactions in the banking, insurance, asset management, private wealth, and exchange sectors in Europe.

Matt O'Neill joined Flow Traders in early December 2022 as the Global Head of Corporate Strategy and a member of the Executive Committee. Matt is responsible for the ongoing development of Flow Traders' corporate strategy, including mergers and acquisitions, strategic partnerships, wholesale brokerage strategy, investor relations, and the venture capital arm Flow Traders Capital. He has over 18 years of experience in financial market infrastructure development and investment, as well as expertise in wholesale brokerage services. Before joining Flow Traders, Matt worked at Goldman Sachs, overseeing global market strategic partnerships and investments in the Asia-Pacific region.

Establishing a Venture Capital Division FlowTradersCapital to Explore Digital Asset Opportunities

Last July, Flow Traders announced the establishment of a dedicated venture capital division, FlowTradersCapital, with an initial commitment of €50 million. This division focuses on platforms, data, and connectivity, directly investing in innovative companies that have the potential to accelerate growth, enhance transparency in financial markets, and achieve scalability in the financial ecosystem. In fact, even before the official establishment of this division, FlowTraders had already supported several early-stage crypto startups and achieved substantial returns on investments, such as in the cryptocurrency exchange ErisX. Beyond the potential for investment returns, Flow Traders aims to expand its involvement in emerging technologies, identify market trends, and explore new business opportunities that create long-term strategic value.

In the eyes of then-CEO Dennis Dijkstra, the creation of Flow Traders Capital was a natural and logical next step for Flow Traders. By investing Flow Traders' financial capital, knowledge, and expertise, the company could access emerging ecosystems and innovative technologies while generating synergies with existing businesses.

In addition to providing direct financial support, Flow Traders' digital asset division can leverage its decades of market-making experience in traditional markets to offer market-making advice to token projects and cryptocurrency exchanges. It provides stable, deep, and competitive liquidity around the clock through complex trading algorithms across more than 20 leading cryptocurrency exchanges and can offer tailored liquidity solutions to partners. Additionally, the Flow Traders Capital team can provide founders with knowledge in product design, capital markets, and listing strategies.

After the collapse of FTX last November, Flow Traders stated, "Our robust and prudent risk management approach means we were not significantly impacted," and mentioned reducing exposure to crypto platforms. However, Flow Traders still expressed confidence in the "long-term potential" of cryptocurrencies and DeFi to disrupt traditional trading and financial markets, believing that the development of digital assets has created "many strategic investment opportunities at more attractive valuation points."

Portfolio Focused on DeFi

Since last year, Flow Traders has actively invested in crypto projects. As of February this year, the company reported that it had invested €25.3 million in 23 projects within the crypto industry. The crypto targets that Flow Traders has invested in are primarily focused on DeFi and infrastructure.

Here are some of its crypto investments based on publicly available information.

Sei Network

Sei Labs, founded by former Goldman Sachs technology investment banker Jeff Feng and former Robinhood software engineer Jay Jog, developed the public chain project Sei Network, which is the first Layer 1 blockchain designed for trading and is currently in the public testnet phase, with plans to launch the mainnet later this year. Last August, Sei Labs completed a $5 million seed round of financing, led by Multicoin Capital, with Flow Traders participating; in September, Sei Network launched a $50 million ecosystem fund; in January this year, the cryptocurrency exchange MEXC launched a $20 million special fund to support the development of key projects on Sei Network; in April this year, Sei Labs announced a $30 million financing at an $800 million valuation, which will be used for development and marketing in the Asia-Pacific region, with investors including Flow Traders, Jump Capital, and Multicoin Capital.

C3

The cryptocurrency exchange C3 is a self-custodial exchange aimed at changing the market structure of cryptocurrencies and providing a secure, transparent, and trustless trading platform. One of the main advantages of C3's self-custodial design is the versatility it offers users. Individuals can seamlessly trade from various non-custodial wallets covering multiple blockchains, while institutions can trade through their preferred custodians. In February this year, C3 announced the completion of a $6 million seed round of financing, led by the venture capital arm of hedge fund Two Sigma Investments, with Flow Traders and Jump Capital participating.

Empiric Network

The decentralized oracle Empiric Network is built on StarkNet and is an oracle that uses zero-knowledge technology to bring the principles of DeFi into data infrastructure. Last July, Empiric Network announced the completion of a $7 million financing round, led by Variant, with Flow Traders participating, and angel investors including Polygon co-founder Sandeep Nailwal. The funds will primarily be used for hiring and expanding the development team.

Thalex

Thalex is a cryptocurrency derivatives trading platform focused on options and futures, collaborating with Bitfinex and Bitstamp to allow their clients to access the full suite of Thalex derivatives from the user interface. Positions on Thalex can be opened by transferring collateral held at partner exchanges to a dedicated Thalex margin account instantly and for free. The Bitfinex partnership is expected to go live later this year. Last July, Thalex announced it had completed a €7.5 million Series A financing round, with participation from Bitfinex, Bitstamp, and Flow Traders.

Elwood Technologies

The cryptocurrency technology company Elwood Technologies, founded by renowned hedge fund manager Alan Howard in 2018, focuses on market access and trading platforms for cryptocurrencies, serving fintech companies, asset management firms, and other institutional investors. Last February, it underwent a strategic integration with Bloomberg to serve institutional clients of Bloomberg's Asset and Investment Managers (AIM). In May last year, Elwood Technologies completed a $70 million Series A financing round, led by Goldman Sachs and Dawn Capital, with Flow Traders participating.

Tonic

Tonic is a DEX protocol in the NEAR ecosystem, established in January 2022, designed for decentralized collaboration to facilitate fast and seamless trading of any assets on NEAR and Aurora. Last April, Tonic announced the completion of a $5 million financing round, led by Electric Capital and MOVE Capital, with Flow Traders participating. The funds will be used to expand the team and scale operations.

BloXroute

BloXroute is a service provider offering a blockchain distribution network for DeFi traders on Ethereum, Polygon, and Binance Smart Chain. Its high-performance blockchain distributed network (BDN) allows users to avoid network congestion and reliably receive important information about buy and sell orders, prices, and positions. BloXroute announced the completion of a $70 million Series B financing round last April, led by SoftBank's SoftBank Vision Fund 2, with Flow Traders participating, and SoftBank Group's investment director Robert Kaplan subsequently joining the BloXroute board.

Ondo Finance

The DeFi lending protocol Ondo Finance was founded by former Goldman Sachs Group employees Nathan Allman and Pinku Surana. Its treasury includes both fixed-income and variable-income types, with the fixed-income treasury seeking stable returns and the variable-income treasury maximizing returns through leverage. In August 2021, Ondo announced the completion of a $4 million seed round of financing, led by Pantera Capital.

AllianceDAO

Alliance DAO originated from the Web3 incubator DeFi Alliance. In January 2022, DeFi Alliance created the decentralized organization Alliance DAO and completed a $50 million financing round, with over 300 contributors joining the DAO and participating in the financing. As a result, Alliance DAO began to replace DeFi Alliance in the public eye, becoming one of the largest acceleration DAOs in the WEB3 space.

Kemet Trading

Kemet Trading is a simplified solution for digital asset derivatives trading designed for institutional investors, aimed at providing institutional-grade infrastructure for digital asset derivatives trading and optimizing access to liquidity, data, trade execution, and post-trade workflows. It offers services such as access to the best liquidity venues through CeFi and DeFi.

Astaria

Astaria is an NFT lending platform and liquidity engine that allows users to use their NFTs as collateral to earn instant liquidity. Led by cryptocurrency veterans who have previously worked with the decentralized finance (DeFi) protocol Sushi and at ConsenSys, Astaria ultimately aims to integrate multiple chains beyond Ethereum to support loans in other cryptocurrencies. It raised $8 million in seed funding, with participation from Wintermute and Flow Traders.

D2X

D2X, headquartered in Amsterdam, aims to establish a pioneering institutional-grade and regulated options and futures exchange for digital assets in Europe, providing financial institutions with capital-efficient and clean asset class exposure while reducing operational and regulatory risks. D2X adopts a regulatory-first approach, aligning with existing EU regulatory frameworks. It completed a €5 million seed round of financing in early 2022, led by Tioga Capital Partners.

Crossover Markets

The digital asset trading company Crossover Markets is launching a new trading venue, CrossX, to meet the liquidity demands of institutions participating in the crypto market. CrossX will enable clients to create customized dark and light liquidity pools. It will also support anonymous, public, and semi-public trading. The trading fee on the platform is 0.01%. In March this year, Crossover Markets completed a $6.35 million seed round of financing, with participation from Flow Traders, Wintermute, and others.

GoGoPool

The decentralized staking protocol GoGoPool is based on the L1 blockchain Avalanche, aiming to bring liquid staking and simplify the process of launching subnets on the Avalanche blockchain. Last August, GoGoPool completed a $5 million seed round of financing, co-led by Framework Ventures and Coinfund, with Flow Traders participating.

Injective

The DeFi-optimized public chain Injective announced in January this year the launch of a $150 million ecosystem plan to further promote developers building new applications on its chain. Other institutions have also joined this initiative, including Pantera Capital, Kucoin Ventures, Jump Crypto, IDG Capital, Gate Labs, Delphi Labs, Flow Traders, and Kraken Ventures. The Injective ecosystem fund is currently one of the largest funds in the Cosmos community.

Econia Labs

Econia Labs is a startup developing an order book protocol for the Aptos blockchain and is collaborating with the Aptos team on the development of this protocol. In March this year, it raised $6.5 million in a seed round led by Dragonfly, with other supporters including Aptos Labs, Wintermute Ventures, and Flow Traders. The company will use the funds to expand its team, support community initiatives such as hackathons and grant programs, and help developers join the Aptos and Econia ecosystems.