US trading titans and brokerage firms are building a crypto exchange that brings investing in digital assets further into the domain of traditional finance, by mimicking the structure of how other asset classes trade.
(Bloomberg) — US trading titans and brokerage firms are building a crypto exchange that brings investing in digital assets further into the domain of traditional finance, by mimicking the structure of how other asset classes trade.
EDX Markets will start trading a limited number of spot, crypto tokens starting with a November trial period, with the official launch in January, Chief Executive Officer Jamil Nazarali said in an interview. It is backed by Charles Schwab, Fidelity Digital Assets, Paradigm, Sequoia Capital, Citadel Securities and Virtu Financial.
Similar to trading equities and options, EDX will allow investors to buy and sell digital assets through their existing broker dealer, rather than an outside venue or directly through a crypto-native exchange.
“We’re taking some of the best features of traditional finance and bringing it to the digital markets to make it more efficient, and bring that cost saving to investors,” Nazarali said.
Nazarali, formerly global head of business development at Citadel Securities, is among industry veterans now at EDX. David Forman, former chief legal officer at Fidelity Brokerage Services, is EDX general counsel. And the exchange’s Chief Technology Officer Tony Acuña-Rohter was CTO at ErisX, now a part of Cboe Global Markets.
The technology is being built by MEMX, the exchange venue founded by some of the biggest players in U.S. stocks. EDX’s systems will be based at a data center in Secaucus, New Jersey, using software that ensures trades are processed in the order they are sent, Nazarali said. This type of order processing and management is different from how the majority of crypto exchanges operate, he said.
Through this partnership, MEMX’s entry into trading digital assets was done without a “complete overhaul,” CEO Jonathan Kellner said. Existing infrastructure was modified to handle the new functions trading digital assets.
Together, the firms hopes to reach an untapped pool of investors sitting on the sidelines. Even amid industry staff cuts and a plunge in prices that’s being called a “crypto winter,” many investors have been growing more comfortable with crypto in recent years, prompting interest from traditional firms.
“Many investors are interested in cryptocurrencies but are worried about a potential hack, or other unknowns with existing crypto exchanges,” Nazarali said. “But they are familiar with broker dealers in other asset classes, and if crypto is offered, they are comfortable trading through them. By separating the responsibility for operating an exchange from those trading on it, conflicts of interest are also eliminated, he said.
Read More: Citadel Securities’ Nazarali Leaves for Joint Crypto Venture
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