In February, E-FOREX, a magazine facing 34,000 trading firms worldwide, published its Special Report named “delivering most cost effective crypto trading infrastructures”. LOTS made a voice in it.
After BAKKT exchange announced its delay of launch and SEC refused again the application of Bitcoin ETF, it brings new thinking to the crypto market on how to prepare well before the future market becomes matured, especially to institutional investors presence in light of such events.
Joe Morgan, the former journalist at Bloomberg, investigated the crypto currency market, interviewed with more than 5 experts in this area to explore what key trading tools and infrastructure is going to be required for brokers and institutional firms who are looking at the space.
Transparent Compliance Is Firstly Required
The approval of a Bitcion ETF would be an important milestone if crypto is to attract a significant institutional presence. Still allegations of market manipulation in the crypto space are a barrier to the launch of it. “Market manipulation is the biggest problem that we have in crypto today. We have seriously suffered from that from the early days on as soon as we were listed. It is kind of frustrating as a founder to know that those other projects all work with the exchanges so it is all coordinated.” says Dominik Schiener, co-founder and co-chairman of a blockchain stratup focused on the Internet of Things.
“Institutional firms are primarily concerned with stability while maintaining adaptability – both in terms of functionality and regulatory compliance,” says Tyler Moeller, cofounder and CEO of Broadway Technology from New York providing high-performance financial trading solutions. He believes “tremendous potential” for growth in the long term and argues that when a clearly defined regulatory framework for governing cryptocurrencies is put in place it will be to the benefit of all market participants.” According to a research note by JPMorgan published in February, there are significant challenges for crypto market participants to meet Know Your Customer (KYC) requirements. Regulators are still formulating the rules governing crypto assets, creating uncertainly among institutional investors as to what will be required.
To be expected, crypto trading will evolve from “speculative assets” to “truly value-based” investment tools onto a global level to be effective with more transparent guidelines in the future.
Higher Liquidity is required as the Engine for Institutions
“While there are many active players, mainstream financial institutions and real-money buy-side are still to a large extent in the preliminary phases of adoption” Ayal Jedeikin, founder and CEO of TradAir added: “Obtain the proper liquidity at any given point of time is vital in crypto trading. An institutional enterprise grade trading platform that provides sophisticated price aggregation is an essential tool when trading digital assets.”
Jedeikin also discussed the most possible solution to this key issue: “A strong business intelligence layer can harvest client trends. Rules and flexibility in the aggregation approach can be used to create bespoke streams, but to achieve that we will need to understand client-customized workflows. Those who want to go a step further will want the ability to dynamically create their own prices and manage their coverage strategy.”
On this same point, Paul Smith, CEO at Mobile Trading Partners also mentioned the key solution for infrastructures, which is to offer API access to all high-end clients for them able to scale the operation. Services shall be delivered as technology licensed partnerships to help client resell and rebrand in most cases.
Proven Security is also a Key Consideration
How to produce consolidated order books; publishing pricing; route order flows and manage risk at the same time? It is the last but not least concern in this report that is pointed by the CEO of LOTS: “Once digital currencies are lost, there is no way for them to be found. There are so many security issues encountered in the operation of a crypto exchange that need to be resolved before big institutions come into this area, including transaction security, wallet security and system security to name just a few.”
Given the potential for exchange hacks are greater, firms will need to carefully manage custody and settlement risks. Here in this discussion, from the years of experience from traditional financial market to the crypto field, Zeen also mentioned a potential solution by leveraging the transaction system on the blockchain and smart contract technology as the designated third-party custody auditing function, making sure the clients’ assets are non-transferable for any other purposes. The decentralized trading systems have risen as the attracted trend to address security problems.
The future market intends to create more Liquidity and Ownership, as well as requires operating with more Security and Transparency. What LOTS is developing as needed, is a decentralized autonomous peer-to-peer model that will motivate independent and equal financial services to everyone.
The e-FOTEX magazine is a paid media with exclusively directional distribution. It is designed and published for specific groups of members from professional assets management backgrounds, intending to discuss and search for the best execution of transactions. The editorial team of e-FOREX has major professional trading media background (e.g. The Trade, FX Week, Automated Trader, etc.). It is aimed at more than 34,000 professional trading institutions and a small number of individuals in charge of financial strategies. It is also distributed at the annual Global Industry Summit for major industry decision makers to read. With global influence, 70% of e-FOREX's distribution areas are in Europe and the United States, and 20% in Asia as well as 10% in Australia, Middle East and Africa.
For details of this special feature, please find the link below: