USDQ is used to denote quanto contracts that have:
(a) quote currency in USD and
(b) the margin and settlement currency are other than USD.
(a) quoted in USD and margined & settled in BTC and
(b) quoted in USD and margined & settled in USDC.
Recall that in a typical vanilla futures contract, the quote currency and margin/ settlement currency are the same. E.g. our ATOMBTC perpetual contract, quote, margin, settlement currency is BTC.
According to Wikipedia, “A quanto is a type of derivative in which the underlying is denominated in one currency, but the instrument itself is settled in another currency at some rate. Such products are attractive for speculators and investors who wish to have exposure to a foreign asset, but without the corresponding exchange rate risk.”
In simple terms, Quanto Futures are contracts in which the pay-off is calculated in one currency but paid in another currency. Quantos are attractive because they safeguard the trader from uncertain exchange rate fluctuations. By introducing Quanto, the trader is hedged against the risk without an extra step.
The invention of Quanto’s was required because US investors wanted exposure to Japenese stocks. However, this leads to exposure risk not only in Japanese stocks but also USD/JPY currency rates. Thus, through Quanto’s US investors invested in Japanese stocks through futures on the Nikkei which were settled in USD, eliminating the currency exposure risk.
Quantos enable us to solve for both the issues mentioned above. Quote currency remains USD and the settlement currency is either BTC or USDC. The choice between offering BTC vs. USDC margining/ settlement is based on trader demand
|ETHUSDQ||Ethereum-USD Quanto||Vanilla Future, quoted in USD, settled and margined in USDC|
|XRPUSDQ||Ripple-USD Quanto||Vanilla Future, quoted in USD, settled and margined in USDC|
|LTCUSDQ||Litecoin – USD Quanto||Vanilla Future, quoted in USD, settled and margined in USDC|
|LEOUSDQ||Leo Coin – USD Quanto||Vanilla Future, quoted in USD, settled and margined in USDC|
|XMRUSDQ||Monero – USD Quanto||Vanilla Future,s quoted in USD, settled and margined in USDC|
|BSVUSDQ||Bitcoin Cash SV – USD Quanto||Vanilla Futures, quoted margined and settled in BTC|
|BNBUSDQ||Binance Coin – USD Quanto||Vanilla Future, quoted in USD, settled and margined in BTC|
This is what a BTC-USD USDC Quanto pair looks like on Delta Exchange. You can find Bitcoin Quanto Futures here.