EP 4 — Arca’s Jeff Dorman on Why Bank Custody Services Could Transform Digital Assets

From redefining prime brokerage models to navigating the complexities of T+0 settlement, this episode of Derivatives Decoded features Jeff Dorman, Chief Investment Officer at Arca, delivering an institutional playbook for the future of digital asset market structure. Drawing from his experience as a credit trader during the 2008 financial crisis, Jeff gives Ash a compelling analysis of why traditional prime brokerage and risk management frameworks need fundamental rethinking for digital assets, not just adaptation. 

His firm's survival through multiple market cycles while managing over $500M in assets demonstrates the value of rigorous counterparty risk management and fundamental analysis in an industry that has seen numerous institutional failures. As one of the few firms applying traditional valuation frameworks to digital assets, Arca's approach to categorizing and analyzing digital assets offers unique insights for institutional investors navigating this rapidly evolving landscape.

Topics discussed:

• Advanced analysis of why T+0 settlement fundamentally breaks traditional prime brokerage models, requiring institutions to completely rethink capital efficiency and counterparty risk management rather than simply adapting existing frameworks.
• Detailed examination of the infrastructure gap in digital asset markets: while deceptively similar to traditional finance on the surface, key differences in settlement, custody, and collateral management create unique challenges for institutional capital deployment.
• Quantitative analysis of DEX market share growth (1% to 15-20%) coupled with a sophisticated examination of why institutional capital remains sidelined despite clear technological advantages.
• Framework for institutional valuation of digital assets through multi-factor analysis: quantifiable financial value, measurable utility value, and correlative social value.
• Comparative analysis of execution venue selection, examining how capital efficiency and collateral management requirements drive institutional traders to optimize across IBIT options, Deribit, and other venues based on specific portfolio constraints.
• Technical examination of operational infrastructure evolution, from basic portfolio tracking to institutional-grade systems, highlighting remaining gaps in cross-venue position management and risk analytics.
• Detailed analysis of how the SAB 121 repeal and potential bank custody services could reshape institutional market structure, with specific focus on implications for trading operations and risk management.