CoinFLEX Secures Over $10M in Funding

The round was co-led by Polychain Capital and NGC Ventures, with participation from Divergence Digital Currency and Bitcoin Cash advocate and …

coinflexCoinFLEX, a Seychelles-based physically delivered crypto futures exchange, secured over $10m in funding.

The round was co-led by Polychain Capital and NGC Ventures, with participation from Divergence Digital Currency and Bitcoin Cash advocate and angel investor Roger Ver.

Led by Mark Lamb, CEO, CoinFLEX is a physically delivered crypto futures exchange developed to solve the issues with cash-settled crypto futures contracts and provide high leverage ways to hedge crypto exposure with zero index or settlement manipulation risk. The company is focused on the Asian retail trader market as well as the market for commercial hedging, including mining firms, OTC trading desks and global proprietary trading firms.

CoinFLEX has a trading volume of over $150,000,000 USD.

In order to support this growth and further accelerate liquidity, the company has also announced the launch of its Market Making Program, an initiative aimed at professional proprietary trading firms, hedge funds and institutions within the cryptocurrency industry, to participate in the platform while meeting predetermined monthly objectives.



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Touching on the Brutal Irony of Cryptocurrency Trading for Investors

It’s important to illustrate the fact that I am one of those that has their flag thoroughly flying for the future of cryptocurrencies and blockchain technology.

Crypto Trading – The Brutal Irony Of It

Through the worlds of social media, it’s almost become a rite of passage that we, at some point in our time online will be approached by one of a veritable legion of ‘Introducers’. Along with making themselves a general nuisance to those on either platform, they falsely peddle their ‘access’ to a range of Bitcoin traders, along with espousing their ‘special offers’ from a wide range of amateur Over the Counter (OTC) trading desks.

One thing that we’ll find ultimately is that they contain far more hot air than the do contacts, and that their ‘trading desks’ ultimate strategy boils down to just calling wholesale markets and peddling their bootleg marketing strategies within the bitcoin ecosystem.

It’s one of the true, and very incredible ironies that comes from this industry, especially when we take into consideration some of the underlying objectives set out back in 2008 by Bitcoin – which is to provide as clean a shot between two peers, and, as a result – remove the middlemen – which getting rid of unnecessary friction laden costs within the financial world.

Fast forward ten years down the line, and who are we seeing as a persistent and acutely annoying body that has surprisingly grown in spite of this objective? Middlemen. It’s irony at its worst, therefore, that we see far more bitcoin trading being conducted by middlemen than from the world of traditional finance. It’s because of this that, instead of seeing trading costs decrease over time, we have seen them climb even higher, actually outstripping non-digital asset trading.

Now, before we delve further into the world and ridiculousness that has come to be known as the market structure of what we now know as the crypto trading market. It’s important to illustrate the fact that I am one of those that has their flag thoroughly flying for the future of cryptocurrencies and blockchain technology. As a result, I am fully on board with seeing cryptocurrency revolutionize the marketplace that we see, often in our peripheral vision, while Blockchain revolutionizes everything else.

One of the reasons why I think that cryptocurrencies have this potential is because of my own thinking when it comes to cryptocurrency exchanges, and how it can work to really simplify the process, supplying clients from all across the world with the same asset which can be immediately paired with any currency or commodity in the world, including against stablecoins.

It is with this kind of potential in mind that we can easily see the niche that the middlemen in the market had, steadily start to erode into an antiquated tool of the past, due to them only being able to operate wherever their geography confines them to, or wherever regulations force them to adhere to and serve.

But in order to be a true believer in this, we have to identify the fact that, for being one of the very rare products that espouse a path to eradicating these middlemen, it has fast become one of the markets in which middlemen are the most prevalent.

Hypothetically, if we had one investors that was being ‘represented’ by one of these ‘introducers,’ and that same introducer was able to ‘win’ thanks to their successful procurement of that one investor. This very same ‘winner’ then goes on to contact five OTC desks in order to do what he refers to as ‘Sourcing liquidity’ on behalf of their client.

Once they’ve made a choice on the desk, that desk goes on to contact three additional market makers, from which it can choose one to instigate the trade.

Once this market maker has been selected, it then provides its chosen client with a set price, after doing its own research on where they believe that they can trade this kind of order. The transaction is then completed with the aforementioned client, with the market maker managing to trade out their position through this exchange.

One of the major and glaring issues that come with this kind of trading model is that it’s very much like a telephone game. And, as a result, is a highly inefficient, time-consuming system. This kind of system also means that there is a commission based spread taking place across four counterparties, which makes no sense and is rife with price gouging.

What makes this whole system increasingly worse is the fact that each of these entities, from ‘introducers’ to the Over the Counter Desks and even Market Makers contacted through this whole exchange are fully aware of the existence of this kind of order. What this means is that the price agreed to by the investor needs to be agreed upon and subsequently acted upon by all parties, meaning that, often, by the time that these trades are set up, the market value has fluctuated negatively or positively, putting a great deal of the cost on the investor.

While we may resign ourselves to thinking that this option is the only one to make when looking to invest in bitcoin, it is really not the case. There are some good options out there for budding investors interested in trading in bitcoin and looking to do it with as much efficiency as possible.

The best kinds of examples that we can see include a range of larger scale wholesale markets and market makers that have since developed and implemented a high-quality framework of systems for trading across a range of exchanges along with other market makers.

Along with this, there is a range of agent desks along with smart order routing systems which have since been established to support new and existing investors. While the presence of these kinds of services does inspire a greater level of confidence for those interested in investing, placing ourselves into their shoes, however, it is genuinely challenging to find out which trading desk is really the best for the needs of the individual investor.

In order to really help streamline your search as an investor. Here are some of the following questions you need to ask when looking at a specific trading company.

First – Is It Trading Against My Current Order Flow As A Matter Of Principal? Example – Does It Take On The Opposite Side Of Trades Using Its Own Capital?

This is the first question simply because it is one of the most important ones that you need to be able to answer when it comes to the trading company that you’re looking at. It tells you straight away whether you’re looking at a company that has a proprietary trading desk or not.

Should the answer be a yes, it’s not really a good or bad kind of answer, but there are some important factors, whichever way the question is answered – One of the positives is that you are going to likely be trading with an entity that doesn’t have to pay some amount in commission to an intermediary entity.

But with this in mind, you should only look to conduct trades with them if they contact you first. The reason for this is because, while no intermediary is good, if they have a proprietary trading desk and are using their own capital, continuous trading on this desk will result in you paying more than at other platforms to spread the risk.

Alternatively, or in addition to this, you can take the alternative measure of getting in contact with multiple desks in order to really source your trade. The problem with this, however, is that you would then be leaking a great deal of information into the markets. And a good number of desks will occasionally ‘pre-hedge’ their digital assets ahead of going ahead with the initial trade.

While this can give you a better understanding as to what price cryptocurrencies are trading for, but this can result in the very expensive activity of asset ‘frontrunning,’ which can result in the price ramping up against your better judgment.

By comparison, if the desk that you researched does not take part in committing capital to trade, that is not strictly a good/bad thing either. This really depends on the kind of process and relationships that they have with their investors. If they’re operating as some kind of agent with a system of ‘natural’ counterparties that commit to these kinds of trades, or operate using a more sophisticated kind of trading platform, these can provide a great deal of value to all parties in involved.

When it comes to these ‘natural’ counterparties, though, it is wise to be initially suspicious of those that claim to be operating within the cryptocurrency market, as these often turn out to be false more frequently than true.

Second – Where Exactly Do These Firms Source Liquidity From? How Do They Source It, And What Does It Normally Charge For This? Is It A Charge Which Is Reflected As A Kind Of Commission? Or Is It Reflected In The Price Of The Investment?

One of the other important questions that you need to ask as well is where exactly your Over the Counter desk is getting its liquidity from exactly. One of the immediate red flags that you should be able to see is if this desk relies almost wholly on other OTC desks in operation – do not use it.

The logic is why would you want to use an intermediary desk in order to converse and pursue trades depending on what another trader would do when that same trader can deal with you directly? With this kind of system, you are effectively paying for a whole other desk that merely serves as a trading switchboard.

Along with this being wholly inefficient, along with time and money consuming system, it also means losing a great deal of control over the various orders you would want to pursue. Unfortunately for many of us, these desks are very commonplace and are actually the majority of OTC’s that are in operation out there in the cryptocurrency market.

Lastly – What Kind Of Electronic Trading Tools Does This Company Make Use Of? And How Does It Engage With More ‘Public’ Markets?

If you have an OTC desk that makes use of either a combination of single exchanges or of Over The Counter desk systems, this can make for an extremely suspect system.

It’s almost impossible for any trader, no matter how accomplished they are, or what kind of setup they have, to simultaneously make an acute assessment of all markets, while . also making a precise calculation of all the optimal pieces of a given order to send across to markets over the complete life of a single order.

One answer that you should be looking out for however is whether the desk has some kind of algorithmic trading system in place, one with the highest degree of connectivity possible, so as to give you the fast and accurate data.

This one is a pretty self-explanatory statement when it comes to other asset classes out there, but doesn’t hold as true for the crypto market. With the presence of such tools within the trading world in existence, it’s time for investors in the crypto world to take a far closer look at these pieces of software and begin to insist that agents make use of them as well.

In summary, it is high time that we begin to demand a far better quality of service from those crypto markets out there, rather than just settle for the current sluggish and inefficient system that we’re getting. These same markets need to spend more time caring about obtaining the best possible kind of execution. And, as a result, making them and their investors a far greater level of returns while simultaneously improving the market.

Thanks to CoinRoutes CEO for the invaluable insights and knowledge of crypto trading.

The Ultimate Irony of Crypto Trading

David Weisberger is co-founder and CEO of CoinRoutes and a veteran of building trading desks and financial technology businesses. The opinions …

David Weisberger is co-founder and CEO of CoinRoutes and a veteran of building trading desks and financial technology businesses. The opinions expressed in this article are his own, and do not reflect CoinDesk’s position.

The following article originally appeared in Institutional Crypto by CoinDesk, a free newsletter for the institutional market, with news and views on crypto infrastructure delivered every Tuesday. Sign up here.

We have all witnessed armies of “introducers” trolling around LinkedIn and Telegram advertising their access to buyers or sellers of bitcoin, coupled with hundreds of wannabe over-the-counter (OTC) trading desks whose only method of trading is to call wholesale market makers.

The irony of this is amazing, considering that one of the most important goals of bitcoin and other cryptocurrencies is to “eliminate middlemen” and remove frictional costs from the financial system. Today, however, bitcoin trading is done by more middlemen than in traditional finance, with the result that frictional trading costs are far higher than for non-digital assets.

Before delving into the silliness of the current market structure for trading crypto, it is important to note that I am a fervent believer in the potential for crypto to revolutionize the capital markets, eventually.

I have, on the record, stated that the ability of crypto market structure to support global capital formation and trading will eventually mean that all financial assets will trade digitally.

My reasoning is based on the ability of crypto exchanges, serving clients around the world, to trade the same asset against a variety of different currencies, cryptocurrencies or stablecoins. This can potentially eliminate a wide variety of intermediaries from markets that currently serve one geography trading in one currency per instrument. That being said, the current crypto OTC market is littered with intermediaries, all of whom extract their own commission.

Consider the following workflow diagram that represents a typical transaction in crypto today:

In this example, the investor is “represented” by an introducer, who wins from among five introducers that all talk to that investor. The winner contacts five OTC desks to “source liquidity” for its client. One desk is chosen, and it, in turn, contacts three market makers and chooses one for the trade.

The market maker then gives the client a price, after checking where they believe they can trade the order; the transaction is done with the client and the market maker trades out of the position via an exchange.

This model is, of course, quite inefficient. Paying a commission or implied spread to four different counterparties makes little sense, but even worse is the fact that each of the OTC desks and market makers contacted knows about the order’s existence. This, in turn, makes it likely that the market would move before the trade is consummated, magnifying the cost to the investor.

All is not lost, however, as there are legitimate options for investors that want to trade efficiently. For example, the most sophisticated large wholesale market makers have built excellent systems for trading across exchanges and other market makers. In addition, agent desks with smart order routing systems are being established. From the perspective of investors, however, it can be hard to discern each firm’s real capabilities. That makes it difficult for investors to find the best trading desk to suit their needs.

My advice to investors is to ask the following questions when evaluating a trading firm:

1. Does it trade against my order flow as “principal”? (I.e., does it take the other side of the trade by committing their own capital?)

The answer is vital, as it tells you immediately if you are facing off with a proprietary trading desk. If the answer is “yes” that is neither bad nor good, but it does have important implications – it means that you are likely trading without having to pay an extra intermediary (good), but, unless the desk contacted you first, you should only trade with them if you need immediacy. That is because immediate liquidity comes with a cost, and you end up paying too much in the implied spread.

Additionally, if you contact multiple desks to source your trade, you are leaking a lot of information to the market, and desks will often “pre-hedge” ahead of consummating the trade. That is very expensive as it amounts to legal “frontrunning” that will move the price against you.

If, however, the desk you are talking to does not commit capital, that is also neither good nor bad, depending on their process and relationships. If they are acting as an agent and have a bonafide “natural” counterparty to the trade or if they have a sophisticated algorithmic trading platform, they can provide substantial value. In the case of “natural” counterparties, however, be suspicious as most of those claims in the crypto market tend to be false.

Algorithmic platforms built for the crypto markets are typically the most cost-efficient trading alternative. Once again, be careful to understand if the desk you are talking to trades for their own account also. If they do, ask for their procedures in writing that stop them from trading ahead of or alongside your order. If they don’t provide that, assume that they are going to use your trade to make trading profits.

2. How and where does the firm source liquidity and what does it charge to do so? Is that charge reflected as commission or a markup/markdown from the price?

Asking where your OTC desk is sourcing liquidity is also vital. If it relies exclusively on other OTC desks, find another one. Why do you need an intermediary desk to talk to firms that will take your call themselves? That means you are paying an extra desk, for no reason. In addition, you would be losing control over your order. Sadly, such desks are very common and probably make up the bulk of the trading universe. If, however, they have a robust platform with access to a combination of OTC desks and exchanges, the next question becomes key.

3. What electronic trading tools does the firm utilize and how do they interact with “public” markets?

If your OTC desk uses a combination of single exchange or OTC desk interfaces, be extremely suspicious.

It is almost impossible for a trader to simultaneously survey all markets and calculate the optimal pieces of the order to send to markets over an order’s full life. The answer you should be looking for is that the desk has an algorithmic trading system with maximum connectivity and access to data.

That statement is considered self-evident in other asset classes, but not in crypto. Now that such tools for trading crypto exist, it is time for crypto investors to take notice and demand their agents use them.

In conclusion, it is about time for investors in the crypto markets to start caring about best execution, which will help them earn greater returns while improving the market structure overall.

That is important as such improvement will help attract reluctant institutional investors that are leery of rapid price moves and the difficulty of discerning the price of liquidity.

Broken bitcoin on chart via Shutterstock

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Asian and European Customers of Coinbase Get OTC and Custody Features

Coinbase, one of the largest cryptocurrencies exchanges in the US is bringing its custodial and OTC solutions to its European and Asian customers as …

Coinbase, one of the largest cryptocurrencies exchanges in the US is bringing its custodial and OTC solutions to its European and Asian customers as well. Now, high volume traders in the two regions can enjoy trading cross-border wire transfer services, custodial services, and OTC trading desk services from the exchange. The services will be live with immediate effect, announced the exchange.

High Volume Traders on Prime Get a Boost

Coinbase Prime will be offering OTC trading desks and custodial services to a select customer in both Europe and Asia. Both the features are now live in the two regions. The OTC trading desks set up in the US and Europe will be available to a global customer base of the exchange. High volume customers can now execute large traders with reduced price slippage on the network. Coinbase noted that its desk is agency only, which means that it will “we never trade on a principal basis or against our clients. Coinbase never trades on a proprietary basis.”

The second service- Coinbase Custody, is a crypto cold storage service for large clients. Coinbase Custody is regulated by the New York Department of Financial Services and provides institutional-grade, highly secure crypto storage facility. Coinbase will hold all user assets offline and follow leading security practices while providing insurance to users.

Cross-border Wire Transfers Open Up

The service will be available to both Coinbase Pro and Coinbase Prime customers. In countries where fiat rails have not been established, Coinbase will use SWIFT based cross-border inbound and outbound transfers. The users can now fund their accounts using any non-US bank wire transfers across the border.

The exchange said that this feature would help users “to access Coinbase’s deep pool of crypto liquidity for the first time.” It will also help them make use of the USDC stablecoin available on the platform that can be redeemed for 1 dollar (for each coin) at any time without a fee.

Coinbase is counting on growing institutional interest from hedge funds, family offices, endowments, and proprietary trading firms in the crypto sector. It noted that its suite of products, ranging from Coinbase Pro and Prime to Coinbase Custody, will be helpful for a wider range of crypto market participants from exchanges to miners.

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HC Tech: it’s time to speak up

… proprietary trading and technology firm was launched in 2007 by Joseph Niciforo and Charles Carey, a former vice-chairman of CME Group.

Non-bank liquidity provider (NBLP) HC Tech is making a splash this year, ranking as the largest spot FX liquidity provider by market share in the Americas, ahead of global currency behemoth JP Morgan, in a recent industry survey.

Formerly known as Henning-Carey Proprietary Trading, the Chicago-based proprietary trading and technology firm was launched in 2007 by Joseph Niciforo and Charles Carey, a former vice-chairman of CME Group. Niciforo began his career at Tudor Investment Corporation.


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