ErisX Plans On Attracting More Institutional Investors Into Crypto Space
U.S.-based crypto exchange ErisX announced earlier this May that it had successfully launched a spot market trading service.
With this development, the exchange has moved closer to becoming cryptocurrency’s one-stop shop for spot and crypto derivatives trading.
In its announcement, ErisX noted that it now supports fiat trading pair pegged on the dollar and digital assets bitcoin (BTC), bitcoin cash (BCH), ether (ETH) and litecoin (LTC). It also supports crypto-to-crypto trading with bitcoin having trading pairs against the three supported cryptocurrencies.
What is ErisX’s plan?
For the last two years, ErisX’ plan has been to build a trusted marketplace that would support greater institutional adoption of cryptocurrencies.
What the firm aims at is to bring into the crypto market players from the capital markets and offer them a venue to access digital assets in much the same way they do traditional financial instruments like securities.
Apart from providing access to a crypto spot market, ErisX has been working on plans that will see it launch a crypto derivatives exchange.
As of now, the Chicago-based company is only waiting for approval from the U.S. Commodity Futures Trading Commission (CFTC) that should clear it to offer derivatives trading and also operate as a clearinghouse.
User will have to undergo compliance checks like Know Your Customer (KYC) and Anti-Money Laundering (AML) before they are allowed to use the platform.
Brokerage firms, like TD Ameritrade that has been reported to be testing the ErisX technology, already provide for these checks and will thus find it much easier to integrate its clients.
Meeting institutional demand
ErisX has been backed by 22 investors so far, raising a total of $47.5 million as noted on Crunchbase.
Some of the investors include firms like DRW Holdings, TD Ameritrade, Nasdaq, and Tradestation, all of which see ErisX as a unique opportunity for the crypto market to attract global institutional investors.
For TradeStation, investing in ErisX stemmed from the exchange’s efforts to bridge the gap that currently exists between traditional and crypto markets. According to the firm’s president John Bartleman, supporting ErisX stands to benefit the entire crypto ecosystem.
TD Ameritrade, on its part, has recently seen demand for crypto trading services by its client base increase. It, therefore, invested in the exchange to leverage the added transparency and regulatory-compliance to provide its customers access crypto assets.
Major U.S.-based crypto exchanges like Coinbase and Gemini are regulated and institutional access to trading services. However, these platforms’ services reportedly do not meet the wide-ranging needs of a growing base of institutional investors.
Characteristically, institutional investors employ leverage tactics as they look to hedge against or optimize returns on their various portfolios, mostly through derivatives.
Some of the most sought-after derivatives in the market include futures contracts, swaps, contracts for differences (CFDs), options and warrants.
The CME Group and CBOE Global Markets launched cash-settled bitcoin futures in December 2017, with CBOE choosing to discontinue the product in March. The exchange operator reportedly took the step after facing tough competition from its rival the CME.
The CME has purportedly continued to see growing volumes on its bitcoin futures, but despite the improved showing, investors are said to eye a futures market that offers physically-settled bitcoin futures.
It is here that ErisX, and its main rival ICE-owned Bakkt, have looked to when developing their market infrastructures. The two platforms are developing futures products that will be physically-settled to meet institutional investor demand for the same.
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.