VIEWPOINT

What steps are crypto
exchanges taking to meetthe needs of institutional
traders and investors?

frameworks are robust, effective, andunder the supervision of respected
regulatory bodies. Once a regulatory
framework is set, institutions will haveclarity and can participate without
fear of stepping out of line – clearly
beneficial for exchanges.
How do you see the client mix ofdigital asset exchanges changing
as professional investors increase
their crypto activity? Will any
category of firm be likely toe-Forex spoke with Jenna Wright, Managing Director, LMAX Digital, one of the industry’s leading
trading venues, to discuss some of the issues that are likely to influence and shape how crypto
exchanges continue to evolve to meet the needs of institutional clients.

dominate?
Currently, the crypto market is

Bitcoin can be a valuable risk sentiment indicator for investment management professionals

VIEWPOINT

predominately retail, with theJenna Wright
What work have leading

prop trading firms and institutions

became the first market data exchange

and increasing competition between

Our institutional client base recognises

Importantly, it also means acting as

who make markets in retail crypto,

contributor to the Pyth Network, theregulated, positive actors can onlythat the global crypto currency

an established and regulated market,

dominating institutional trading

decentralised financial market data

be a good thing. For the asset classmarket is at a nascent stage of its

following best practice in the areas

venues and utilising those venues to

distribution network in 2021. We also

to continue to mature, institutions

development. These firms need aof KYC, AML, security, complianceexit risk. However, as the tokenisation

provide our crypto market pricing

need supportive regulation to provide

legitimate and regulated venue on

and risk management. LMAX Digitalof real-world assets continues todata via crypto indices such as CF

certainty to all sides of the trade,which to acquire, trade and hold

was launched to allow institutional

gather pace, that will allow more

Benchmarks and Coindesk Indices toprovide growth and innovation within

crypto currencies securely with highparticipants to enter the crypto

efficiency of capital in the years ahead,enhance market structure and facilitate

the market and ultimately foster

quality, deep institutional liquidity.

market through a regulated andso we expect digital assets to become

accurate price discovery.

healthy competition.

That’s ultimately why we launchedsafe environment. This remains ourde rigueur and more institutions to get

LMAX Digital, informed by our

focus as more institutions move into

involved – for example asset managers

Bitcoin can be a valuable risk

What other factors are likely toknowledge and depth of experience inthe market and hold more capital inand banks.

sentiment indicator for investment

shape how institutional crypto

the FX market.

cryptocurrencies.

management professionals. Crypto

exchanges evolve over the next

The lack of a credit mechanism or

markets trade 24/7, allowing investors

few years?

How are crypto exchanges going

What impact will increased

credit intermediation within theto adjust risk amid unexpected macro

to make their venues even moreregulatory oversight of the crypto

institutional markets for banks toevents even when other markets

What we’ve seen in the past year is

attractive to institutional players?

markets have on institutional

offer their clients crypto trading credit

are closed. Bitcoin’s liquidity offers aa clear flight to quality within theexchanges?

remains a challenge that also needs

unique opportunity to use BTC as amarket. This will benefit the industry

to be addressed in order to unlock thehedging instrument. BTC can be used

as a whole, providing an opportunity

full ability of institutions to participate.

directly to readjust risk and indirectly

to focus less on personalities and moreas a proxy to gauge how markets willon cutting-edge technology and thereact to significant events.

long-term benefits this asset class canexchanges undertaken to satisfy
the wishlists of their clients

Meeting the needs of institutional

and provide secure tradingclients requires taking the things weGlobal regulators have turned

environments?

have learned from our history in FX

more attention to crypto than everand established capital markets andbefore – rightly cracking down on

What datasets (historic and/orInstitutional requirements when

applying them to cryptocurrencies.

violations, and enacting standards

real time) do you feel digital asset

trading crypto are very much the same

There are also aspects of developing

to protect consumers, reduce market

exchanges need to provide to

Do you expect to see more

as when trading fiat currencies. Of

crypto market structure that havefragmentation and participation byaccommodate institutional clients?

institutional crypto exchanges

paramount importance to institutions

great potential to benefit traditional

bad actors. We fully support regulation

are low latency, accurate pricefinance; take 24/7 trading for example.

coming to the industry as it protects
consumers, creates stability anddiscovery and the ability to trade withbring to capital markets and the futureof finance.

being launched and what issues

Ultimately, what we expect to see

Access to accurate and real time

may influence whether the market

in the next few years is exchanges

data is paramount when trading inreaches a saturation point?

continuing to develop their products

like-minded participants. Leading

The key is having a pragmatic

harvests innovation – conditions thatany asset class and cryptocurrenciesexchanges recognise these needs

approach that brings together the best

institutions look for.

are no different. Real time, precise,At LMAX Group, we welcome

latency, robust technology enablingand have built institutional grade

elements of both. In practice, for us,

reliable market data is the foundationcompetition from other market

their customers to react to market

infrastructure, with the reliability ofthis means delivering the same quality

Regulation takes time but the progressof efficient asset pricing and valuation

participants and view it very much as

events faster. Increasing use of such

100% uptime, and having effective

and robust technology institutionaland focus on it is encouraging.

that ensures a robust and orderly

a tide that can lift all boats. At a time

technology will continue to compress

risk management and controls.

clients have become accustomed to

We would like to see policymakers

marketplace. At LMAX Group we willof upheaval in the development of thespreads leading to less arbitrage

and applying it to a new asset class.

working with the industry to ensure

always take lead, which is why we

cryptocurrency market, encouraging

amongst exchanges.

64 MAY 2023

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MAY 2023

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