The Small Exchange Company

The Small Exchange Company: A Comprehensive Overview

1. Company Overview

Founding Date and Background

The Small Exchange Company was founded in January 2019 with the aim of creating a customer-centric futures exchange designed specifically for retail traders. The founders include notable figures from the trading industry, such as Tom Sosnoff, founder of Tastytrade, and the founders of Peak6, Matt Hulsizer and Jenny Just.

Parent Company/Ownership Structure

The Small Exchange operates independently but has garnered significant investment from well-known financial entities, including Citadel Securities and Jump Capital. As of the latest updates, it has raised a total of approximately $34.09 million through multiple funding rounds.

Headquarters Location

The Small Exchange is headquartered in Chicago, Illinois, a city known for its rich trading history and as a hub for various financial markets.

Global Business Scope

The Small Exchange aims to bridge the gap in futures trading for retail investors by providing smaller, simpler, and more accessible products. While primarily focused on the U.S. market, the exchanges partnerships, such as with CQG, facilitate access to global trading.

Main Regulatory Bodies

The Small Exchange is regulated by the Commodity Futures Trading Commission (CFTC), which oversees the futures and options markets in the United States. The exchange operates as a registered designated contract market (DCM).

2. Company History and Development

Key Milestones

• 2019: The Small Exchange was founded and began developing its infrastructure.
• March 2020: The CFTC approved its application to become a U.S. futures exchange.
• June 1, 2020: The Small Exchange opened for trading, offering initial products including an equity index, dollar index, and metals index.
• December 7, 2020: The launch of small treasury yield futures (S10Y) that allow trading based on yield rather than price.
• June 21, 2021: Introduction of the first cannabis equity index future (S420).

Business Expansion Journey

Since its inception, The Small Exchange has focused on expanding its product offerings. The exchange has introduced futures contracts that cater to various asset classes, including equities, currencies, and commodities. The addition of cannabis and cryptocurrency-related futures indicates a strategy to attract diverse trader interests.

Customer Base Growth

The Small Exchange targets retail traders, aiming to simplify futures trading. The exchange has implemented initiatives such as a subscription model that offers reduced fees and market access, contributing to its growing customer base.

Platform Development History

The Small Exchange built its own proprietary trading infrastructure, including a matching engine and risk management system. This independent development allows for tailored functionalities that enhance the trading experience for retail investors.

Important Awards or Recognitions Received

While specific awards have not been detailed in the available information, the Small Exchange has received recognition within the trading community for its innovative approach to making futures trading accessible to everyday investors.

3. Trading Services Offered

Forex Trading Options

The Small Exchange offers a simplified futures product based on the U.S. dollar. The specific number of currency pairs available for trading may vary, but the focus is on providing straightforward access to currency trading without the complexities of traditional forex markets.

Stock Trading Options

The exchange provides futures contracts linked to a small stock index (Small Stocks 75), which tracks major sectors of the U.S. stock market. This allows traders to gain exposure to a broad range of equities without needing to trade individual stocks.

CFD Trading Products

As of the latest updates, there is no direct mention of Contracts for Difference (CFDs) being offered by the Small Exchange. The primary focus remains on futures contracts.

Other Financial Instruments

The Small Exchange has expanded its offerings to include:

• Treasury Yield Futures: Simplified access to trading U.S. Treasury yields.
• Cannabis Equity Index Futures: The first of its kind, allowing traders to engage with the cannabis sector.
• Cryptocurrency-Related Futures: Plans to introduce futures based on an index of cryptocurrency-related publicly traded companies.

Special Services or Unique Advantages

The Small Exchange emphasizes a "small, standard, and simple" approach to futures trading, making it easier for retail investors to participate. The exchange provides lower capital requirements and reduced market data fees, enhancing accessibility for its users.

4. Regulatory and Legal Background

Detailed Regulatory Information

The Small Exchange is primarily regulated by the CFTC, ensuring compliance with U.S. federal regulations governing futures trading. The exchange adheres to stringent requirements for transparency, reporting, and market integrity.

Legal Entity Structure by Region

As a U.S.-based entity, the Small Exchange operates under U.S. law and is subject to the regulatory framework established by the CFTC. It does not have a complex international legal structure, focusing instead on the domestic market.

Client Fund Protection Measures

The Small Exchange implements measures in line with regulatory requirements to protect client funds. This includes segregating customer funds from operational funds to ensure security and compliance.

Countries/Regions Served

While the primary focus is on the U.S. market, the Small Exchange's partnership with CQG allows for potential access to international markets, although specific details on global reach are limited.

Compliance History

The Small Exchange has maintained compliance with CFTC regulations since its inception, receiving approval to operate as a designated contract market. There have been no publicly reported compliance issues.

5. Competitive Landscape

3-5 Main Competitors

• CME Group: A leading global marketplace for derivatives and futures trading.
• ICE (Intercontinental Exchange): Offers futures and options across various asset classes.
• Eurex: A major European futures and options exchange.
• CBOE (Chicago Board Options Exchange): Known for options trading but also offers futures products.

Positioning in the Industry

The Small Exchange positions itself as a customer-focused alternative to traditional futures exchanges. By catering specifically to retail traders and simplifying the trading process, it aims to carve a niche in a market dominated by larger, more complex exchanges.

Market Differentiation Factors

• Product Simplicity: The Small Exchange emphasizes smaller contract sizes and straightforward trading processes, appealing to novice traders.
• Cost Efficiency: Lower fees and simplified pricing models make it more accessible for retail investors compared to traditional exchanges.
• Innovative Offerings: The introduction of unique products like cannabis futures and simplified treasury yield trading distinguishes it from competitors.

The Small Exchange Company continues to innovate within the futures market, providing a platform designed for retail traders who seek simplicity and efficiency in their trading experience. For more information about their offerings and to get started, learn more.

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