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Welcome to IOTAmarkets! -- IOTA is a quantum-resistant distributed ledger protocol launched in 2015, focused on being useful for the emerging m2m economy of Internet-of-Things (IoT), data integrity, micro-/nano- payments, and anywhere else a scalable decentralized system is warranted. IOTA uniquely offers zero fees, no scaling limitations, and decentralized consensus where users are also validators. The digital currency 'iota' has a fixed money supply with zero inflationary cost.
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Crypto and the Latency Arms Race: Crypto Exchanges and the HFT Crowd

Crypto and the Latency Arms Race: Crypto Exchanges and the HFT Crowd


News by Coindesk: Max Boonen
Carrying on from an earlier post about the evolution of high frequency trading (HFT), how it can harm markets and how crypto exchanges are responding, here we focus on the potential longer-term impact on the crypto ecosystem.
First, though, we need to focus on the state of HFT in a broader context.

Conventional markets are adopting anti-latency arbitrage mechanisms

In conventional markets, latency arbitrage has increased toxicity on lit venues and pushed trading volumes over-the-counter or into dark pools. In Europe, dark liquidity has increased in spite of efforts by regulators to clamp down on it. In some markets, regulation has actually contributed to this. Per the SEC:
“Using the Nasdaq market as a proxy, [Regulation] NMS did not seem to succeed in its mission to increase the display of limit orders in the marketplace. We have seen an increase in dark liquidity, smaller trade sizes, similar trading volumes, and a larger number of “small” venues.”
Why is non-lit execution remaining or becoming more successful in spite of its lower transparency? In its 2014 paper, BlackRock came out in favour of dark pools in the context of best execution requirements. It also lamented message congestion and cautioned against increasing tick sizes, features that advantage latency arbitrageurs. (This echoes the comment to CoinDesk of David Weisberger, CEO of Coinroutes, who explained that the tick sizes typical of the crypto market are small and therefore do not put slower traders at much of a disadvantage.)
Major venues now recognize that the speed race threatens their business model in some markets, as it pushes those “slow” market makers with risk-absorbing capacity to provide liquidity to the likes of BlackRock off-exchange. Eurex has responded by implementing anti-latency arbitrage (ALA) mechanisms in options:
“Right now, a lot of liquidity providers need to invest more into technology in order to protect themselves against other, very fast liquidity providers, than they can invest in their pricing for the end client. The end result of this is a certain imbalance, where we have a few very sophisticated liquidity providers that are very active in the order book and then a lot of liquidity providers that have the ability to provide prices to end clients, but are tending to do so more away from the order book”, commented Jonas Ullmann, Eurex’s head of market functionality. Such views are increasingly supported by academic research.
XTX identifies two categories of ALA mechanisms: policy-based and technology-based. Policy-based ALA refers to a venue simply deciding that latency arbitrageurs are not allowed to trade on it. Alternative venues to exchanges (going under various acronyms such as ECN, ATS or MTF) can allow traders to either take or make, but not engage in both activities. Others can purposefully select — and advertise — their mix of market participants, or allow users to trade in separate “rooms” where undesired firms are excluded. The rise of “alternative microstructures” is mostly evidenced in crypto by the surge in electronic OTC trading, where traders can receive better prices than on exchange.
Technology-based ALA encompasses delays, random or deterministic, added to an exchange’s matching engine to reduce the viability of latency arbitrage strategies. The classic example is a speed bump where new orders are delayed by a few milliseconds, but the cancellation of existing orders is not. This lets market makers place fresh quotes at the new prevailing market price without being run over by latency arbitrageurs.
As a practical example, the London Metal Exchange recently announced an eight-millisecond speed bump on some contracts that are prime candidates for latency arbitrageurs due to their similarity to products trading on the much bigger CME in Chicago.
Why 8 milliseconds? First, microwave transmission between Chicago and the US East Coast is 3 milliseconds faster than fibre optic lines. From there, the $250,000 a month Hibernia Express transatlantic cable helps you get to London another 4 milliseconds faster than cheaper alternatives. Add a millisecond for internal latencies such as not using FPGAs and 8 milliseconds is the difference for a liquidity provider between investing tens of millions in speed technology or being priced out of the market by latency arbitrage.
With this in mind, let’s consider what the future holds for crypto.

Crypto exchanges must not forget their retail roots

We learn from conventional markets that liquidity benefits from a diverse base of market makers with risk-absorption capacity.
Some have claimed that the spread compression witnessed in the bitcoin market since 2017 is due to electronification. Instead, I posit that it is greater risk-absorbing capacity and capital allocation that has improved the liquidity of the bitcoin market, not an increase in speed, as in fact being a fast exchange with colocation such as Gemini has not supported higher volumes. Old-timers will remember Coinsetter, a company that, per the Bitcoin Wiki , “was created in 2012, and operates a bitcoin exchange and ECN. Coinsetter’s CSX trading technology enables millisecond trade execution times and offers one of the fastest API data streams in the industry.” The Wiki page should use the past tense as Coinsetter failed to gain traction, was acquired in 2016 and subsequently closed.
Exchanges that invest in scalability and user experience will thrive (BitMEX comes to mind). Crypto exchanges that favour the fastest traders (by reducing jitter, etc.) will find that winner-takes-all latency strategies do not improve liquidity. Furthermore, they risk antagonising the majority of their users, who are naturally suspicious of platforms that sell preferential treatment.
It is baffling that the head of Russia for Huobi vaunted to CoinDesk that: “The option [of co-location] allows [selected clients] to make trades 70 to 100 times faster than other users”. The article notes that Huobi doesn’t charge — but of course, not everyone can sign up.
Contrast this with one of the most successful exchanges today: Binance. It actively discourages some HFT strategies by tracking metrics such as order-to-trade ratios and temporarily blocking users that breach certain limits. Market experts know that Binance remains extremely relevant to price discovery, irrespective of its focus on a less professional user base.
Other exchanges, take heed.
Coinbase closed its entire Chicago office where 30 engineers had worked on a faster matching engine, an exercise that is rumoured to have cost $50mm. After much internal debate, I bet that the company finally realised that it wouldn’t recoup its investment and that its value derived from having onboarded 20 million users, not from upgrading systems that are already fast and reliable by the standards of crypto.
It is also unsurprising that Kraken’s Steve Hunt, a veteran of low-latency torchbearer Jump Trading, commented to CoinDesk that: “We want all customers regardless of size or scale to have equal access to our marketplace”. Experience speaks.
In a recent article on CoinDesk , Matt Trudeau of ErisX points to the lower reliability of cloud-based services compared to dedicated, co-located and cross-connected gateways. That much is true. Web-based technology puts the emphasis on serving the greatest number of users concurrently, not on serving a subset of users deterministically and at the lowest latency possible. That is the point. Crypto might be the only asset class that is accessible directly to end users with a low number of intermediaries, precisely because of the crypto ethos and how the industry evolved. It is cheaper to buy $500 of bitcoin than it is to buy $500 of Microsoft shares.
Trudeau further remarks that official, paid-for co-location is better than what he pejoratively calls “unsanctioned colocation,” the fact that crypto traders can place their servers in the same cloud providers as the exchanges. The fairness argument is dubious: anyone with $50 can set up an Amazon AWS account and run next to the major crypto exchanges, whereas cheap co-location starts at $1,000 a month in the real world. No wonder “speed technology revenues” are estimated at $1 billion for the major U.S. equity exchanges.
For a crypto exchange, to reside in a financial, non-cloud data centre with state-of-the-art network latencies might ironically impair the likelihood of success. The risk is that such an exchange becomes dominated on the taker side by the handful of players that already own or pay for the fastest communication routes between major financial data centres such as Equinix and the CME in Chicago, where bitcoin futures are traded. This might reduce liquidity on the exchange because a significant proportion of the crypto market’s risk-absorption capacity is coming from crypto-centric funds that do not have the scale to operate low-latency strategies, but might make up the bulk of the liquidity on, say, Binance. Such mom-and-pop liquidity providers might therefore shun an exchange that caters to larger players as a priority.

Exchanges risk losing market share to OTC liquidity providers

While voice trading in crypto has run its course, a major contribution to the market’s increase in liquidity circa 2017–2018 was the risk appetite of the original OTC voice desks such as Cumberland Mining and Circle.
Automation really shines in bringing together risk-absorbing capacity tailored to each client (which is impossible on anonymous exchanges) with seamless electronic execution. In contrast, latency-sensitive venues can see liquidity evaporate in periods of stress, as happened to a well-known and otherwise successful exchange on 26 June which saw its bitcoin order book become $1,000 wide for an extended period of time as liquidity providers turned their systems off. The problem is compounded by the general unavailability of credit on cash exchanges, an issue that the OTC market’s settlement model avoids.
As the crypto market matures, the business model of today’s major cash exchanges will come under pressure. In the past decade, the FX market has shown that retail traders benefit from better liquidity when they trade through different channels than institutional speculators. Systematic internalizers demonstrate the same in equities. This fact of life will apply to crypto. Exchanges have to pick a side: either cater to retail (or retail-driven intermediaries) or court HFTs.
Now that an aggregator like Tagomi runs transaction cost analysis for their clients, it will become plainly obvious to investors with medium-term and long-term horizons (i.e. anyone not looking at the next 2 seconds) that their price impact on exchange is worse than against electronic OTC liquidity providers.
Today, exchange fee structures are awkward because they must charge small users a lot to make up for crypto’s exceptionally high compliance and onboarding costs. Onboarding a single, small value user simply does not make sense unless fees are quite elevated. Exchanges end up over-charging large volume traders such as B2C2’s clients, another incentive to switch to OTC execution.
In the alternative, what if crypto exchanges focus on HFT traders? In my opinion, the CME is a much better venue for institutional takers as fees are much lower and conventional trading firms will already be connected to it. My hypothesis is that most exchanges will not be able to compete with the CME for fast traders (after all, the CBOE itself gave up), and must cater to their retail user base instead.
In a future post, we will explore other microstructures beyond all-to-all exchanges and bilateral OTC trading.
Fiber threads image via Shutterstock
submitted by GTE_IO to u/GTE_IO [link] [comments]

Cryptocurrency and Blockchain – Industry News – (03.08.19 – 03.15.19)

Total Market Cap, as of 03.15.19 at 12:00pm (PST): $137,576,523,635 (+2.79%)

Missed last week’s update? Click here

STORY OF THE WEEK

Cosmos, a blockchain interoperability project has released its platform dubbed “Cosmos Hub”. This comes after 3 years of planning and development and a $16,000,000 USD raise in 2017. The platform aims to solve scalability of distributed technology by proposing a platform of blockchains.

CRYPTOCURRENCY TRADING SERVICES

•Traders on Coinbase can now transfer cryptocurrency directly from its trading platform to the institution’s custodial wallet offering Coinbase Wallet.
Coinbase Pro, Coinbase’s professional platform lists Stellar Lumens for trading.
•New Zealand based exchange Cryptopia migrates 35% of the platform’s funds into new wallets.
DX Exchange, an Estonia based exchange utilizing Nasdaq’s trading engine launches security token offering (STO) listings.
•Trust Wallet, Binance’s endorsed wallet now supports Ripple (XRP). Traders and developers building on top of Trust Wallet can take advantage of the support of the Ripple ecosystem.
•Hong Kong based exchange Gatecoin shuts down as a result of a legal dispute with a payment processor and a devastating 185,000 ETH and 250 BTC hack in 2016.

REGULATION

•In the U.S state of Texas, a bill has been proposed to require identity verification for sending cryptocurrency payments.
Central bank of Russia aims to introduce an annual limit of 600,000 rubles ($9,100 USD) for unqualified investors who want to purchase digital assets.
Thailand Securities and Exchange Commission (SEC) has approved the decision to create a portal for regulated ICO’s.
•Singaporean based exchange Quoine has been found liable by the Singapore International Commercial Court (SICC) for reversing 7 trades from market maker B2C2 in April 2017. Trades were valued at 10 Bitcoins per 1 Ethereum.
The Canadian Securities Administrators (CSA) and the Investment Regulatory Organization of Canada (IIROC) is now seeking regulatory input on cryptocurrency exchanges, in an attempt to integrate securities laws where appropriate.
•In the U.S state of Colorado, governor Jared Polis has signed the Digital Token Act on March 8th, 2019. This will exempt specific cryptocurrencies with specific characteristics and functionality from being classified as a security.

TECHNOLOGY

Tether has recently updated terms of service which will shift its reserves from 100% traditional currency (USD) to a combination of traditional currency and cash equivalent assets such as loans.
Samsung unveils a native cryptocurrency wallet for its flagship S10 device that can be found on the Samsung Galaxy Store. Wallet will support Ether (ETH) and ERC20 based tokens alongside 4 dApps from the outset.
MyEtherWallet launches an alpha version of its Ethereum blockchain explorer, EthVM. INSTITUTIONALIZATION
Kakao Corp, the creators of KakaoTalk – South Korea’s most used messaging app raises $90 million USD to supplement the launch of a new blockchain platform in June dubbed “Klaytn”.
•A blockchain based ETF, consisting of 48 companies involved or building blockchain technology has launched on the London Stock Exchange (LSE).
Chicago Board Options Exchange (CBOE) announces that it will not add a Bitcoin (BTC) futures market in March.

PEOPLE

•Mark Karpeles, the CEO of Mt Gox faces a 10-year jail term from the Japanese authorities for embezzlement of client assets.
•Danelle Dixon has been appointed the new CEO of the Stellar Foundation, previously COO of Mozilla.
•Konstantin Ignatov, CEO of multibillion-dollar pyramid scheme OneCoin has been arrested and charged with conspiracy to commit wire fraud. Ignatov’s sister, Ruja Ignatov is charged with wire fraud, securities fraud and money laundering.

TWITTER

@cz_binance – “Populaunpopular opinion: Everyone will be in crypto, sooner or later, whether they know it or not, whether you like it or not.”
@barrysilbert – “Wells Fargo, a Buffett investment, has been fined 93 times for fraud and other abuses, for a total of $14.8 billion in fines since just 2000. I'll take bitcoin's "charlatans" over that any day.”
@erikVoorhees – “Crypto is software eating finance”
submitted by Edmund_N to CryptoMarkets [link] [comments]

A UK trading platform is launching a crypto exchange pitched at banks and hedge funds

LONDON - The UK foreign-exchange trading venue LMAX Exchange is launching a cryptocurrency exchange for institutional investors.
LMAX said it developed the new "LMAX Digital" venue at the request of clients who wanted access to cryptocurrencies like bitcoin and ether. Clients will be able to trade bitcoin, ether, litecoin, ripple, and bitcoin cash on the exchange, which will operate 24 hours a day and seven days a week.
"We are furthering the legitimization of the crypto currency market by offering institutions a platform on which to acquire, trade, and hold cryptocurrencies securely with high quality, deep liquidity," David Mercer, the CEO of LMAX Exchange, said in a statement.
LMAX will offer cryptocurrency custodian services to clients who trade on its exchange, solving one of the major problems that have prevented institutional investors from dabbling in cryptocurrencies.
Banks and hedge funds have been reluctant to buy these new assets given the difficulties in holding and securing them.
LMAX Exchange was launched in 2010 as a multilateral trading venue for foreign exchange and has transacted over $10 trillion of fiat currency since launch.
"We've applied everything we've learned in the institutional FX market to LMAX Digital, to create a fundamentally improved, secure digital exchange based on our proven trading technology, market-leading liquidity, and transparent and precise execution," Mercer said.
The launch of LMAX Digital comes just days after JPMorgan created a new position of head of crypto strategy and weeks after Goldman Sachs signaled its intention to begin trading bitcoin-linked products. Crypto hedge funds have also been springing up, with an estimated 167 launched in 2017, according to the research firm Autonomous Next.
Crypto hedge funds have largely relied on "over the counter" market makers to purchase cryptocurrencies rather than transparent and centralized exchanges. This is because most of the crypto exchanges globally cannot handle the order sizes required without big changes in price. Startups such as B2C2, Circle, and Coinbase have emerged as leading over-the-counter brokers for institutions, but the sums involved remain small compared with other asset classes.
"The rise of institutional trading of cryptocurrencies will be a game changer for the industry," Mercer said. "We believe our new exchange will support the transformation of the crypto market from the fringes to the mainstream.
"Digital currencies are, without a doubt, coming of age. Exchanges will play a crucial role in bringing the major cryptocurrencies into wider circulation, helping them to become accepted into conventional funds which in turn will help to support a normalization of value."
LMAX Digital will be run out of London initially, but Mercer said the company's data-center infrastructure would soon be replicated in New York and Tokyo to support clients in those markets.
submitted by Econcrypt to CryptoCurrency [link] [comments]

Singapore's first bitcoin dispute to go to trial

This is the best tl;dr I could make, original reduced by 73%. (I'm a bot)
SINGAPORE - Singapore's first legal dispute involving the cryptocurrency bitcoin is headed for trial at the Singapore International Commercial Court.
Electronic market maker B2C2 sued bitcoin exchange operator Quoine in May over trades that were allegedly wrongfully reversed, which resulted in the proceeds being deducted.
In a summary judgment hearing on Tuesday, B2C2 sought to recover 3,084.78582325 bitcoins from Quoine, alleging Quoine's breach of trust "Deprived it of the opportunity to sell the proceeds on the date of their highest intermediate value".
B2C2, which is represented by Mr Danny Ong of Rajah & Tann, said it had placed orders on Quoine's platform to sell ethereum - another cryptocurrency - for bitcoins at the price of 10 bitcoins for one ethereum.
Increased interest from institutional investors has resulted in bitcoin spiking through US$11,000 on Nov 29 for the first time, and surging more than 1,000 per cent this year.
The glitch severely disrupted Quoine's ability to retrieve actual market prices for bitcoin and ethereum.
Summary Source | FAQ | Feedback | Top keywords: bitcoin#1 Quoine#2 B2C2#3 market#4 value#5
Post found in /singapore.
NOTICE: This thread is for discussing the submission topic. Please do not discuss the concept of the autotldr bot here.
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LAST WARNING FOR ALL BITCOIN BULLS!!!!! TA Crypto price prediction, analysis, news, trading, charts Wyoming Crypto Bill - B2C2 OTC UK FCA Approval - Nasdaq Crypto Marketing - XRP Coingate - SBI VC Ripple/XRP Mr Kitao of SBI Takes $30 Million Stake in Giant Market Maker B2C2!!!!! Ripple Price Analysis - 26 June 2020 Why Switch From Bitcoin (BTC) To Bitcoin Cash? 31,000 Restaurants Using BCH & More Bitcoin Cash News

Brokerage firms, exchanges, banks and fund managers around the world trust us to deliver 24/7 liquidity. Our market-making on exchange complements our core business of electronic OTC trading, fuelling price discovery. Our clients so value our offering, they voted us Best Institutional Crypto Liquidity Provider in the 2019 Profit & Loss awards. B2C2 Gets Go-Ahead from U.K. Regulators to List Bitcoin Derivative February 3, 2019 Crypto Bitcoin / Investing / Regulation B2C2, a cryptocurrency “liquidity provider” and electronic OTC trading magnate, has recently announced that British regulators have given their U.K.-based subsidiary approval to offer the crypto space a new investment derivative. The first cryptocurrency trial in Singapore involving a claim of some BTC 3,085 due to a trade reversal by Quoine exchange began yesterday in Singapore International Commercial Co B2C2, a cryptocurrency “liquidity provider” and electronic OTC trading magnate, has recently announced that British regulators have given their U.K.-based subsidiary approval to offer the crypto space a new investment derivative. According to a press release shared with Bitcoin Magazine, the British Financial Conduct Authority (FCA) has authorized B2C2 OTC Inc. “to arrange and deal […] • B2C2, a cryptocurrency “liquidity provider” and electronic OTC trading magnate, has recently announced that British regulators have given their U.K.-based. 11.2 C. Amsterdam. 10 September 2020. Home; News. News. Report: The US and China Lag Behind Ukraine… 10 September 2020. News. Chainlink May Be Coiling Up for a Push… 10 September 2020. News. KuCoin Exchange (KCS) are greatly ...

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LAST WARNING FOR ALL BITCOIN BULLS!!!!! TA Crypto price prediction, analysis, news, trading, charts

All the latest Bitcoin Cash news presented this week by Roger Ver, CEO of bitcoin.com, and Zane Tackett, Head of OTC Sales at B2C2 In this episode Roger discusses all the latest Bitcoin Cash news ... BEARS and BULLS FIGHTING , Who will end up controling the BITCOIN market.... Let me know what you think in the comments below, Thanks for all the support! Don't forget to LIKE, COMMENT, and SHARE ... 🛑 SBI Invests $30M in B2C2, Largest Proclaimed Market Maker in XRP. Ripple Receives New York’s First BitLicense for an Institutional Use Case of 👉🏾👉🏾Click "S... Close. This video is unavailable. This Ripple Price Analysis - 26 June 2020, hosted by BNC's Josh Olszewicz reveals technicals for both the XRP/USD and XRP/BTC pairs are bearish. Both pairs remain below their respective 200-day ...

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