1. Deribit Support
  2. Compliance
  3. Legal

Conflicts Of Interest Policy

  • Updated

1 Introduction

Deribit operates a hub and spoke model and in doing so runs the crypto derivatives exchange (“Platform”), Deribit FZE, out of Dubai in the UAE and the broker DRB Panama Inc, out of Panama City. Deribit provides clients with the ability to trade options and futures in selected crypto currencies, including but not limited to BTC, Ether, USDC and USDT.

The Platform is a matching engine, matching Client buy and sell orders against each other in an anonymous capacity. Other than for risk management purposes, Client orders are not executed by any party working for the Platform, they are executed by the Clients entering their orders themselves. This is important to note as the result is that Deribit does not have access to inside Information regarding orders that are about to be placed, which decreases the risk of front running Client orders or trading on Inside Information. 

One of the drivers of its success is the trust of the Clients of the Platform. Identifying, preventing and/or controlling conflicts of interest is important to ensure that the interests, including the trust, of Clients, as well as the reputation of Deribit are protected.  

2 Purpose

The purpose of this Conflicts of Interest Policy (“Policy”) is to identify and prevent (potential) conflicts of interest, and where that is not possible, manage/control such conflicts, that may arise through the business activities of Deribit, in order to prevent them from adversely affecting the interests of its Clients. 

3 Scope

3.1Who?

This Policy applies to Deribit Staff. For the purposes of this Policy, Staff means employees and contractors of Deribit FZE, DRB Panama Inc and their group entities, as well as Deribit Senior Management and Deribit FZE’s Board Members (executive and non-executive).

Deribit Senior Management shall have overall responsibility for ensuring this Policy is up-to-date and fit-for-purpose. The Compliance Officer shall have the primary responsibility for implementing this Policy on a day-to-day basis.

3.2 What?

This Policy covers any Conflict of Interest between:

  • Deribit and its Clients;

  • Deribit and its Staff;

  • Staff and Clients of Deribit; and

  • Two or multiple Deribit Clients.

4 Related policy documents

This Policy should be read in conjunction with the Deribit:

  • Compliance Manual;

  • Deribit Terms of Service;

  • Code of Ethics (part of the Employee Handbook);

  • Outside Business Interest Policy;

  • Gifts and Entertainment Policy;

  • Private Account Dealing Policy; and

  • Anti-Bribery and Corruption Policy. 

These policies along with other policies and procedures are made available to all Employees and at all times on Confluence. Any updates to these policies shall be promptly notified to all Staff.

5 Definitions

Staff means Employees and contractors of Deribit and its group entities, as well as Deribit’s Senior Management and Board Members.

Compliance Officer or Head of Compliance means the Deribit FZE employee appointed as such by the Board of Deribit FZE..

Conflict of Interest means an actual or potential conflict between the interests of Deribit and obligations that Deribit has to a Client. This includes conflicts between the interests of: 

  • Staff and obligations that Deribit has to a Client;

  • Two or more Clients of Deribit towards whom Deribit has obligations; or

  • Deribit and its Clients. 

Client means a natural or legal person who has been admitted to trade cryptocurrency derivatives on Deribit FZE (according to the rules of the Deribit Exchange Rulebook) or is a client of DRB Panama Inc.

In this Policy, references to Clients also include potential Clients. 

Employee means a natural person who is employed by or is otherwise in a relationship of authority or command with Deribit FZE, regardless of duration or nature.

Senior Management means the group of senior managers who oversee and control the Deribit group, including the Board of Deribit FZE and the Executive Committee of Sentillia BV, the parent entity of Deribit FZE.

Board of Directors or Board or Board Members or Directors means the executive and non-executive members of the Deribit FZE Board of Directors.

Inside Informationmeans information of a precise nature, which has not been made public, and which, if it were made public, would reasonably be expected to affect the price of a virtual asset or would affect the investment judgement of a reasonable individual in respect of a transaction involving that virtual asset. The information need not be the determining factor behind any given transaction, but should have a material impact on the decision of any reasonable investor as to whether to carry out such a transaction.

Information shall be deemed to be of a precise nature if it indicates a set of circumstances which exists or which may reasonably be expected to come into existence, or an event which has occurred or which may reasonably be expected to occur, where it is specific enough to enable a conclusion to be drawn as to the possible effect of that set of circumstances or event on the price of a virtual asset.

6 Responsibilities

Senior Management has ultimate responsibility to ensure the proper management of Deribit and the wider group’s affairs and this Policy. 

Senior Management has overall responsibility for ensuring that all conflicts of interest are identified, prevented, managed and monitored. Senior Management has charged the Compliance Officer with ownership of this Policy and the responsibility to determine the necessary courses of action to ensure adherence to relevant laws and regulations and to ensure that relevant processes are managed in an effective, compliant and professional manner.

7 Identifying conflicts of interest

Senior Management together with Compliance shall periodically examine which actual or potential conflicts of interest could arise through the business activities of Deribit. Conflicts of Interest that could lead to damage to the Client's interests will be avoided as much as possible. If it is not possible to prevent such a Conflict of Interest from occurring, Deribit will take measures to or manage the conflict or prevent the Conflict of Interest from resulting in damage to the Client's interests. 

In identifying the types of conflicts of interest that may arise, Deribit shall consider whether Deribit, or an Employee of Deribit:

  • is likely to make a financial gain or avoid financial loss at the expense of a Client; 

  • has an interest, different from the Client's interest, in the result of a service or activity performed for a Client; 

  • has a financial or other incentive to put the interest of one Client or group of Clients above the interest of another Client or group of Clients;

  • carries on the same business as the Client; or

  • receives or will receive an inducement from a person other than the Client for a service provided to the Client in the form of monetary or non-monetary benefits. 

Periodically, but at least annually, a risk assessment is being performed to identify all potential conflicts of interest. This risk assessment is prepared by the Board and facilitated by Compliance. 

The risk assessment includes:

  • an overview of all identified (potential) Conflicts of Interest;

  • for each conflict, a description of how such (potential) conflict may be prevented or mitigated.

The risk assessment is recorded by the Compliance Officer in the Conflicts of Interest Register.

8 Specific circumstances under which conflicts of interest may occur

Conflicts of interest can arise under the following circumstances:

  • the performance of outside business interests by Staff;

  • the acceptance and offering by Staff of business gifts and entertainment invitations;

  • receiving or providing commissions, fees, etc. in connection with services (to be) provided to the Client;

  • presence of price-sensitive or other confidential information;

  • where Deribit’s knowledge of Client transactions can be exploited to Deribit’s advantage or to the advantage of another Client;

  • performance related remuneration; and

  • entering into transactions where a Staff has a material interest.

9 Prevention of conflicts of interest

Where a potential Conflict of Interest is identified, Deribit will seek, as far as is appropriate or reasonably possible in the circumstances, to organise its business activities in a manner that prevents the crystallisation of the Conflict of Interest. This will include procedures and measures to ensure that Staff engaged in different business activities involving a risk of conflicts of interest carry out these activities with a degree of independence which is appropriate to the size and activities of Deribit (and the wider group) and the materiality of the risk of damage to the interests of Clients.

Where necessary or appropriate for Deribit to ensure the requisite degree of independence, procedures and measures to be followed shall include one or more of the following:

  • information barriers to prevent or control the exchange of information between Staff engaged in activities involving a risk of Conflict of Interest where the exchange of that information may harm the interests of one or more Clients;

  • separate supervision of relevant Staff whose main functions involve carrying out activities or providing services for Clients whose interests may conflict, or otherwise represent interests that may conflict;

  • the elimination of a direct link between the remuneration of Staff primarily involved in one activity and the remuneration of other Staff primarily involved in the other activity if a Conflict of Interest may arise in relation to those activities;

  • measures to prevent or restrain any person from exercising inappropriate influence over the way in which a Staff carries out business activities or services for the Client;

  • reassignment of members of Staff to prevent or control the simultaneous or sequential involvement of relevant members of Staff in separate services or activities where such involvement may impair the proper management of conflicts of interest;

  • roll out concise instructions to Staff who are involved in risk reduction transactions (liquidation, etc.), that they are prohibited from using the Inside Information gained in the course of such activities to their advantage (i.e. to make a profit on personal transactions).

10 Management of conflicts of interest

Where a Conflict of Interest is unavoidable, Senior Management, after taking the advice of Compliance, will take appropriate measures to mitigate and manage such Conflict of Interest in a manner that does not lead to favouritism of Deribit to the detriment of the Client or to favouritism of one Client to the detriment of another. 

Compliance records the control measures subsequently taken in the Conflicts of Interest Register.

Senior Management instructs its Staff through internal policies and procedures to prevent or manage conflicts of interest. These policies and procedures include the following.

10.1 Outside business activities

Any external professional positions and outside business interests held by any Staff are not permitted other than with pre-approval in writing from Compliance. 

Rules in relation to external business activities and ancillary positions are captured in the Outside Business Interests Policy.

10.2 Gifts and entertainment

A Conflict of Interest may arise where a Staff receives or offers a gift or form of entertainment that constitutes an inappropriate incentive for a Staff, a representative, or a Client to act in a certain way. Deribit does not permit the offering or acceptance of gifts or entertainment by a Staff unless it is reasonable, appropriate and for a legitimate purpose.

Deribit has imposed rules regarding gifts, hospitality and entertainment, to avoid (potential) conflicts of interest. These rules are captured in the Gifts and Entertainment Policy.

10.3 Personal transactions

Staff are not permitted to carry out personal transactions on the platform:

  • where the carrying out of transactions is extensive and compromises the quality and efficiency of the work conducted for Deribit;

  • in circumstances where such personal transaction could adversely affect a Client or the firm’s position or interest; or

  • which could be qualified as front running Client orders.

Other requirements relating to personal transactions causing a potential Conflict of Interest are captured in the Private Account Dealing Policy. All Staff, regardless of their position, are required to sign to their adherence to the Personal Account Dealing Policy.

10.4 Board conflicts of interest

If a member of the Board discloses that they have a material interest in a transaction, the remaining members of the Board shall consider whether it is appropriate for the concerned Board member to continue to participate in the Board meeting. 

The remaining Board members are entitled to ask the concerned Board member to leave the Board meeting. The concerned Board member shall not use his personal influence in issues whether in or outside the meeting and shall not vote on the decision.

The Company Secretary shall record the conflict in the relevant Board minutes.

11 Disclosure of conflicts of interest to the Client

Where Deribit is not reasonably confident that it is able to manage a particular Conflict of Interest to adequately protect the interest of a Client, the fact, or source of, the Conflict of Interest will be clearly disclosed to the Client before Deribit undertakes any related business. In particular, the disclosure will include: 

  • a specific description of the Conflict of Interest;

  • an explanation of the risks to the Client that arise;

  • that the organisational and administrative arrangements established by Deribit to prevent or manage that Conflict of Interest are not sufficient to ensure, with reasonable confidence, that the risks of damage to the interests of the Client will be prevented; and

  • sufficient detail to enable that Client to take an informed decision with respect to the service in the context of which the Conflict of Interest arises.

Further, the fact of the disclosure is not considered to be a mitigant. All the controls detailed in this policy will continue to be applied in respect of that Conflict of Interest. 

12 Staff declaration

On an annual basis, Staff will be required to complete a declaration rolled out by Compliance with the following objectives:

  • Attest to having read the most recent versions of the conflicts of interest policy, the personal account dealing policy, the outside business interest policy, the gifts and entertainment policy, the employee handbook and the anti-bribery and corruption policy;

  • Attest to not having conducted any personal account dealing transactions or to having declared all executed transactions;

  • Attest to having notified every outside business interest or to not having any to declare;

  • Attest to having declared all gifts, entertainment, hospitality and travel received or given, as required by the gifts and entertainment policy, if any; and

  • Complete any other attestation(s) as seen fit by Compliance and/or Senior Management.

13 Representation of independence to Clients

If Deribit represents itself as being independent with respect to a particular activity:

  • Deribit shall not receive fees, commissions or any benefits, paid or provided from any other entity other than that end Clients in relation to that specific activity; and

  • Deribit shall not have any close links or other legal or economic relationships with third parties which are likely to impair its independence to favour a particular third party in relation to its provision of that specific activity. 

14 Waiver of service

Where Deribit believes it is unable to manage the Conflict of Interest adequately and on a commercially reasonable basis, and the relevant Client(s) does not agree to Deribit acting notwithstanding the Conflict of Interest, Deribit may refuse to provide services to the Client.

15 Record keeping

Compliance shall keep records for a period of eight (8) years of the types of services and activities provided and performed, in respect of which a Conflict of Interest has arisen or may arise which entails a risk of damage to the interests of one or more Clients in the Conflicts of Interest Register. 

This information shall be updated on a regular basis. Compliance will produce written reports on such situations which will be sent to the Board/Senior Management on at least an annual basis. 

16 Periodic review

The Board, in consultation with Compliance, will assess and periodically review, on an at least an annual basis, this Conflicts of Interest Register and will take all appropriate measures to address any deficiencies. 

Compliance will review this policy on an annual basis or more frequently, if required.