The decentralized nature of crypto presents unique challenges to investors of all types, according to Anthony Mazzarese, Co-Founder and Chief Commercial Officer, Crossover Markets Group.
For individual retail traders, bundled services - such as execution, liquidity, custody, etc. - made the market more accessible and easier to understand, he said.
For institutional clients, there is a need to seek best execution, and in most cases that means being able to trade across multiple exchanges and platforms, he added.
By not having fungibility between crypto exchanges since each exchange is also the custodian of the funds, the trade becomes capital inefficient as it becomes expensive to fund positions in many different places, Mazzarese pointed out.
"This 'silo effect' makes true price discovery and best execution difficult to achieve," Mazzarese told Traders Magazine.
For example, when opening a position on a given bundled exchange, a client typically needs to hold the crypto there as well, and then possibly close that position only on that exchange, he explained.
"This closed-loop system is not how institutions interact in other markets," he said.
On March 21, Crossover Markets launched CROSSx, the first execution-only digital asset trading platform, with seed funding from Flow Traders, Nomura's Laser Digital, Two Sigma, Wintermute Ventures, Gate.io and a consortium of retail brokers.
“By decoupling trade execution from custody and brokerage, we give institutions the flexibility to freely choose their own credit counterparties,” Mazzarese commented.
As an execution-only trading platform provider, Crossover does not hold client funds, manage assets or bear counterparty risk.
Crossover's model draws on the best practices and order logic of equity and forex markets, seeking to deliver "unprecedented efficiencies," Mazzarese said.
"We fully expect our clients to not only trade with us, but also run on other platforms and exchanges to seek the best price," he said.
“We facilitate this by not forcing clients to open and close their positions with us. We prefer to compete on price, quality of execution and technical characteristics rather than holding client assets hostage,” he added.
Crossover was founded by veterans of the traditional finance industry.
Anthony Mazzarese and CEO Brandon Mulvihill recently led the FX Prime Brokerage business at Jefferies, while CTO Vlad Rysin was previously CTO of Euronext FX.
“While cryptocurrencies offer tremendous potential for efficiency through the 24/7 movement of funds and the ability to self-custody of assets, there were obvious inefficiencies that became apparent to us. , especially when it comes to institutional clients,” he said.
Mazzarese said that, coming from a traditional financial background, the team was fascinated by the growth of digital assets and the potential this new technology could unlock.
He further stated that the early adoption and growth of digital assets came from the retail community and then later spread to the institutional market.
This “bottom-up” phenomenon is unique because tradfi products often come from the institutional market and only later become available to retail consumers, Mazzarese said.
Because of this new mode of maturation, many of the offerings targeting institutional clients were, in many ways, slightly more advanced versions of retail products, he said.
These missed the mark for sophisticated users, especially the underlying core technology and the bundling of services through a single counterparty, he added.
"We were shocked to learn that the separation of execution and brokerage or custody was not at all common in the market and that there was a lack of genuine 'institutional only' offerings," said said Mazzarese.
Under these conditions, the decision to launch CROSSx seemed obvious, according to Mazzarese: “Our goal is to provide best-in-class execution technology, independent of counterparties, allowing institutional clients to select their own custodians, counterparties and prime brokers. ”
“We believe this is disruptive and will help guide the market towards further institutional adoption,” he added.
With a match engine latency of less than 20 microseconds, the CROSSx platform is several times faster than typical crypto exchanges, according to Mazzarese.
"We pride ourselves on being the fastest trading venue in the digital asset space, not only in terms of trade execution times, but also quote distribution times, and even during periods of volatility. and extremely high throughput," he said.
"Because we are orders of magnitude faster than our peers, we are able to print quotes and execute trades multiple times within each unique quote and trade on other sites," did he declare.
He added that it is a model of a market data framework that provides more granularity on market activity, helping to "fill in the gaps".
Algorithmic traders will generate signals faster on CROSSx, leading to better price discovery in the fragmented market, Mazzarese added.
According to Mazzarese, their CTO Vlad Rysin is an outstanding technologist with over 30 years of experience building ultra-low latency sites in traditional markets.
"Vlad and his team coded our technology in C++ using modern programming methods, omitting unnecessary code that adds complexity and latency to the commercial lifecycle, yet is common in legacy systems," did he declare.
“It helps CROSSx achieve unparalleled speeds and performance,” he added.
This ultra-low latency matching is even more impressive considering the complex interaction rules and sophisticated order routing logic that takes place inside every quote and trade execution, Mazzarese said.
Being able to achieve this level of complexity and sophistication in 20 microseconds, with the ability to process millions of messages per second, is "exceptional", he noted.
"CROSSx is accessible through FIX and we plan to release a binary protocol that will further reduce runtimes," Mazzarese added.
Mazzarese said the team is optimistic about the future of crypto trading in the institutional space.
“We believe others share our vision that market structure must adapt in order to drive mass institutional adoption, and we are pleased with the progress we have seen with some of the leading companies in the market,” said- he declared.
"As an industry, we need to work together to build a healthy ecosystem of participants that serves retail clients to the largest institutions, while mitigating credit risk and delivering the best execution," he said. he concluded.