Over the course of 2018, the cryptocurrency industry transformed from a speculative, wild-west-style marketplace populated mostly by retail investors into a largely regulated trading space for institutional investors. As more institutional investors have entered the space, so too have the number of platforms hoping to onboard them as customers.
Recently, Finance Magnates spoke with Ian Grieves, Managing Director and Head of Product at ErisX, about how ErisX is planning on cornering the institutional market.
Ian Grieves, ErisX.
Grieves began his career as an Options Market Maker and Index Arbitrager on the LIFFE Exchange. Since then, he helped to build algorithmic trading solutions for Futures, Options, and Treasuries at Eccoware/BGC Partners. He also sat as the Managing Director of the Americas for Object Trading, a low latency Direct Market Access.
ErisX “Mirrors the Derivatives Space”
Grieves said that essentially, “ErisX is applying regulatory best practices to the spot market that mirrors the derivatives space.”
He went on to say that ErisX “will lead the way in developing a stable, scalable, and transparent marketplace for retail traders to access digital assets. We will also be the first exchange to provide spot and futures contracts on the same platform. This will provide better Liquidity and a healthier price discovery environment to build a diversified portfolio of digital assets.”
“We are focused on providing the most robust, secure, regulated digital asset offering available to both institutional and individual participants,” Grieves said, adding that the exchange won’t start to roll out its offerings until next year.
“Throughout 2019 we will launch spot and futures markets on Bitcoin, Bitcoin Cash, Ether and Litecoin, subject to regulatory approval. We are also taking an intermediary-friendly approach and working with firms like TD Ameritrade to provide their clients with comfort and familiarity when it comes to trading digital assets.”
TD Ameritrade announced investing into #ErisX, a crypto platform which intends to unveil spot trading and physically-delivered futures for #BCH, #BTC, #ETH, and #LTC. We’re rather disappointed in their choice of cryptos. We’d want to see #XRP and #EOS instead of BCH and LTC.
— Weiss Ratings (@WeissRatings) October 8, 2018
ErisX Plans to Form Deep Connections with Intermediaries
Grieves explained that ErisX’ efforts to approach the cryptocurrency markets is multi-faceted. “Our approach is not just about providing a regulated, robust and diverse marketplace (or applying regulatory best-practices in spot) for institutional investors but also expanding the universe of participants through our intermediary partners,” he said.
He continued to say that this is what ErisX believes to be the missing link in the crypto space. “The current workflow requires participants to open up direct accounts with crypto venues rather than allowing them to make their investments through a broker that offers a suite of services and access to multiple asset classes.”
Grieves went onto explain that this, in addition to several other factors, is what differentiates ErisX from similar platforms, like Bakkt.
After sharing news with you all yesterday, we actually have some more details on the #ErisX initiative. Not only #Virtu and #TDAmeritrade are in, but also Susquehanna and DRW are involved. Pretty big news for crypto! https://t.co/sQWlaJsJ1l
— CryptoManiac ⚡️ (@HappyWithCrypto) October 4, 2018
Earlier this year, J.B. Mackenzie (TD Ameritrade’s managing director of futures and foreign exchange) said that “[ErisX] could open up additional cryptocurrency products on the future and spot side that our clients could potentially trade.” Indeed, ErisX will also offer “a spot market for Bitcoin, Bitcoin Cash, Ether and Litecoin, and then add futures for those instruments on the same platform. This allows for collateral to be utilized across cash and futures, providing better use of capital.”
“We will also look at to launch other products in the future, which could be other tokens or different instrument types. All futures contracts will go through the standard regulatory review process,” he added.
Additionally, ErisX will provide physically delivered futures contracts that “have more granular contracts sizes and expiries; weekly, monthly and quarterlies rather than just daily. This provides the buy side and commercial participants a better way to hedge their positions and secure price certainty over a longer time frame.”
Plans for the Future
A growing number of platforms are vying for the attention of the same institutional investors that ErisX is hoping to onboard. To keep itself competitive overtime, ErisX plans to build these offerings overtime by “[working] closely with intermediaries to expand access to digital assets through their client base. We feel there are still a number of participants that have been on the sidelines waiting for a more regulated offering like ours,” Grieves explained.
ErisX also has much experience on the legal side of its business, and is well-prepped in terms of its compliance measures. “We have operated a regulated DCM for 7+ years and are building a digital asset Clearing House with our DCO application with the CFTC for the futures business. We already have a number of state by state Money Service Business (MSB) licenses for spot and we will have many more before we go live.”
BREAKING: I hope this is the start of retail stock platform like @TDAmeritrade offering #crypto. @ErisFutures is best platform with proper regulatory controls we have seen so far. #HODL #bitcoin #Erisx https://t.co/UGbw70cJme
— WindyCity FinTech (@WCFintech) October 3, 2018
ErisX has plans to expand its regulatory base: “we are working to receive regulatory approval from the Commodity Futures Trading Commission to launch our Derivatives Clearing Organization (DCO).”
Once that’s been cleared, “we will then bring our spot and futures contracts to market with execution, clearing and settlement in-house. We expect to start onboarding spot clients ready for a Q2 launch and we are working closely with our investors and partners to incorporate our products into their technology systems.”
