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Several of Wall Street’s largest trading companies have unveiled plans to invest territories in cryptocurrency markets and open a new front in their battle to win lucrative business from institutional investors.
Jump Trading, GTS and Jane Street, among the largest players in the US stock market, are increasing their digital asset trading after years of secrecy surrounding their early touch to these markets.
They are some of the most competitive trading companies fighting for every trade in global stock, currency and futures markets. Now they are planning a land grab like the bridge between the cryptocurrency world and asset managers eager to trade with the fast-growing market.
“We started trading crypto at the end of 2017 by expanding the experience we developed from other asset classes, and we trade digital assets 24/7 around the world,” said Mina Nguyen, Jane Street’s head of institutional strategy at a interview with Financial Gange.
“We have seen institutional interest grow significantly and we are actively sharing our expertise to support more efficient crypto markets.”
High-frequency traders have been at the forefront of the wave of change that has swept across the U.S. stock market, the world’s largest — over the past two decades. They have used super-fast technology and law changes to make the market more efficient by squeezing margins and commissions on stocks and taking advantage of the price differences for the same asset at different venues. That focus has given them billions of dollars in revenue.
Many now want to bring this know-how to the crypto market as institutional investors are benefited by the high returns offered. The fast prices and extreme tumult are in sharp contrast to the bond, currency and stock markets, where a prolonged period of ultra-low interest rates has dampened volatility.
Large high-frequency trading companies first piled into crypto markets in 2017 when bitcoin prices rose. The majority of these companies remained under the radar with their commitment to crypto until recently, quietly building their market share.
JPMorgan analysts estimated that high-frequency traders at the end of last year were responsible for nearly 80 percent of the bitcoin prices sent to stock exchanges, corresponding to their share of U.S. government debt. Many of these computer-driven traders target the crypto “base” trade mismatch between the spot price and the derivative price.
But many are now also eager to attract foreign trade on behalf of institutional investors and serve as a channel for trade on decentralized networks, where transactions are not matched in a single place.
It sets them up against specialized crypto trading companies like Genesis, B2C2 and Bequant and potentially other exchanges. On Wednesday, the US listed cryptocurrency exchange Coinbase said it had applied to become a futures commission trader, which would allow it to handle futures orders from clients.
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GTS establishes Radkl, a new company that will start proprietary digital asset trading, from bitcoin to the fast-growing decentralized financial market, later this year. Steven Cohen, billionaire hedge fund manager, is also investing in Radkl.
Ari Rubenstein, CEO of GTS, said he saw a “need for sophisticated big players who can navigate the regulatory environment”. He said these players would make the market “more efficient” and “attractive to investors”.
Jump Trading is creating a separate unit of more than 80 people focusing on the growth and development of blockchain networks and digital coins. Kanav Kariya, chairman of the new entity, said Jump had spent decades building high-performance infrastructure. “We’re bringing that muscle to crypto,” he added.