IDG-backed crypto exchange KuCoin on Monday announced the official launch of its derivatives trading platform.

The platform, dubbed KuMEX, will initially open the Bitcoin Perpetual Contract (XBTUSDM), quoted in US dollars, and offer up to 20x leverage, KuCoin said in a press release. It currently supports three types of order: limit order, market order and stop order.

KuMEX aims to create a fair trading environment and lower the threshold for investors. It uses a Bitcoin Spot Index which offers the volume-weighted average US dollar price of bitcoin in six exchanges including Coinbase Pro, Bitstamp, Kraken, Gemini, Liquid and Bittrex.

“Including the figures from more platforms will make the index price on KuMEX more fair and rigorous, avoiding the user's contract being liquidated because of the low liquidity of the trading platform or the large price fluctuations of one or two spot exchanges,” the release said.

Moreover, KuMEX has a “fully transparent” insurance fund, which will ensure that investors who are forced to close their positions will not lose money that exceeds their position margin. In situations where the insurance fund is insufficient, the platform has an Auto-Deleveraging (ADL) mechanism, which will help avoid the inflexibility over settlement in Socialised Loss mechanism.

Further explaining how KuMEX reduces investment threshold, KuCoin said that the XBTUSDM contract value is 1 USD, enabling traders to make a more flexible investment.

“At the same time, KuMEX offers a negative fee for Makers at a rate of -0.025% with a certain amount of fixed commission, encouraging users to provide liquidity to the platform through making the market and earning some commission as an incentive,” it added.

Commenting on the platform launch, Michael Gan, CEO at KuCoin said that derivatives are much riskier than the spot market due to the leverage and call for a more cautious approach.

“KuMEX is a derivative trading platform independently developed by our team, and from its inception, we have positioned it as a genuine and advanced financial product, so that all users can trust the platform and trade on it freely, without worrying about the loss caused by any form of manipulation,” Gan said.

“Following our crypto-to-crypto and P2P OTC platform, KuMEX's launch complements our ecosystem, allowing us to provide a one-stop service to crypto investors.”

Following the platform launch, 50% of the net revenue from KuMEX will be used for bonus distribution for the holders of KuCoin Shares (KCS), the native token of KuCoin.