Crypto Exchange Seed CX Goes Live And Looks To Lure Wall Street Giants With Low Fees
Seed CX has launched its trading platform, taking its first big step as it looks to lure Wall Street investors with an offering of cheap trading costs.
In a press release on Wednesday, the Chicago-based crypto exchange startup stated that major investors would now access its regulated spot trading market for bitcoin, leveraging the “deep book of liquidity.”
The platform currently supports bitcoin/U.S. dollar pairs but has revealed plans to add dollar pairs for Ethereum (ETH, Bitcoin Cash (BCH) and Litecoin (LTC) in the next few days. It will also add support for pairs using the euro and the Japanese yen.
According to Edward Woodford, the co-founder, and CEO of Seed CX, this move allows institutions that want to trade between a variety of cryptos and fiat currencies the opportunity to complete their trades without having to move from one exchange venue to another.
“The crypto markets are highly fragmented in part due to fiat on-ramps. Having multiple pairs on the platform will help consolidate liquidity. It also creates interesting tri-currency arbitrage trades.”
With dozens of institutional clients already using the platform, Seed CX also plans to roll out crypto derivatives trading in the course of 2019.
Cheapest trading costs
But to begin its ascent in the crypto market, the firm is rolling out its services at fees that are among the lowest of any offered in the industry.
Market takers will incur fees that would reach a high of 8 basis points or 0.08 percent of the trade. It is lower compared to what its rivals like Coinbase and Winklevoss’ Gemini exchange would charge to facilitate the same trade.
Among these institutional-grade platforms, for instance at Gemini, takers often pay fees rising to as high as 100 basis points. Coinbase also charges its clients relatively high prices, which usually comes to around 30 basis points for takers.
Such high fees are a concern for many investors on Wall Street, but according to the Seed CX co-founder, the platform’s plans involve using its low fees to attract Wall Street firms.
Explaining the rationale for such an approach, Woodford said this wasn’t any different to taking steps like “smarter risk management, better account management,” and “improved contract and tic sizes.”
Firms can also avoid conflicts of interest, or give better customer support, he added. It works because that is what major institutions want to have.
Woodford also explained that his firm’s offering would suit institutions that want to take a look at the market in the aftermath of massive price declines following the 2018 bear market.
“The narrative right now is ‘low prices, low prices, low prices.”
Other than lower prices, the Chicago-based firm will also rely on an incentive program designed to lure market makers.
Per the press statement, the program features “larger and tighter quote size requirements” that will provide participants access to deeper liquidity.
This may be crucial for Seed CX given that it faces competition from established rivals (Coinbase and Gemini), who incidentally, also offer clients much deeper liquidity than the startup.
Both ErisX and NYSE-backed Bakkt will also provide formidable competition when they launch sometime later in the year.
Seed CX raised $15 million in a series B funding round led by Bain Capital in September 2018, bringing the total to $25 million since the project launched in 2015.
Disclaimer: This is not investment advice. Cryptocurrencies are highly volatile assets and are very risky investments. Do your research and consult an investment professional before investing. Never invest more than you can afford to lose. Never borrow money to invest in cryptocurrencies.