Multi-Dealer Platforms Move To The Forefront Of Both Crypto And Traditional Finance
- Fidelity announced bitcoin trading business launch to come in the next few weeks.
- Michael Moro, Paul, Bialobrzewski, Jeff Dornan, and other speak on the competition to become a one-stop shop.
The cryptocurrency market is filled with tons of competition as it is, but the concept of becoming the one-stop shop for consumers is starting to gain traction. Financial institutions and cryptocurrency firms are going outside of their typical services to entice the consumers of their competing industry, according to a report from The Block on May 9th.
A prime example is found in the new opportunity that Fidelity is offering. Fidelity recently announced that their bitcoin trading business will be launching in the next few weeks, though they are one of the biggest names in traditional asset management. This motion alone pushes the company into the cryptocurrency industry as well.
Most of the time, over-the-counter trading desks are necessary for large investors to trade their coins unless they trade on their own. While OTC trading desks are meant to be helpful, they are plagued with their own troubles, like finding the right buyers and sellers at the best price. As traditional brokerage enters the market too, like Fidelity and Tagomi, the evolution of cryptocurrency is mirroring the progress that other asset classes have made.
Considering these changes, it should not come as a surprise that multi-dealer platforms are starting to rise in popularity, taking center stage for both the crypto market and traditional finance. Paul Bialobrzewski, the CFO of the DV Chain trading firm, spoke with The Block, saying that there are multiple players working to offer crypto brokerage services, but the changes have been occurring for the last few years already. He added,
“Fidelity is obviously coming to the game a little bit later but they’re taking a more measured, more institutional approach to this.”
With crypto OTC trading, a firm or other entity will come to the desk so they can sell a predetermined value of Bitcoin or another asset. The desk would end up being the buyer but would impose a fee. As Reuters’ writers Anna Irrera and Jemima Kelly pointed out, there is a risk with this infrastructure, since these transactions are rarely audited and there’s a chance of one of the sides of the transaction defaulting. Furthermore, OTC traders are not the most technologically advanced players in cryptocurrency; many of these desks conduct their interactions on online messaging systems like Skype.
Hoping to correct some of these concerns, traditional brokers are entering the space and bringing their capital management model in as well. Instead of connecting a buyer and seller to each other, a multi-dealer platform can just worry about the best prices and settle up later. Jeff Dornan, the CIO of Arca, pointed out that the individual that comes in and solves this issue will end up being the one that gains the most benefit in either industry.
Michael Moro, the CEO of Genesis Global Trading, chimed in on the matter as well, telling The Block that he sees this solution as being “the partnership route,” rather than a competition between multiple first. Moro added that the current state of the market has been “much more friendly than competitive.”