Newsletter: Not covered
The most important market trends and how the best minds on Wall Street are responding to them. Delivered every day of the week.
Several of Wall Street’s biggest trading companies have unveiled plans to enter the cryptocurrency markets, opening a new front in their battle to win lucrative business from institutional investors.
Jump Trading, GTS and Jane Street, among the biggest players in the US stock market, are stepping up their trading of digital assets after years of secrecy surrounding their first forays into those markets.
These are some of the most competitive trading companies fighting for every trade in the global equity, currency and futures markets. Now they are planning a land grab as a bridge between the crypto world and asset managers keen to trade in the rapidly growing market.
“We started trading crypto at the end of 2017 by extending the experience we have developed from other asset classes, and we trade digital assets 24/7 around the world,” said Mina Nguyen, Head of Institutional Strategy for Jane Street in an interview with Financial Fois.
“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 through the US stock market, the world’s largest, over the past two decades. They have used lightning-fast technology and regulatory changes to make the market more efficient by reducing margins and commissions on stocks and taking advantage of price differences for the same asset at different sites. This concentration has earned them billions of dollars in revenue.
Many now want to bring this know-how to the crypto market, as institutional investors are drawn to the high returns on offer. The rapid price movement and extreme uproar contrast sharply with the bond, money and equity markets, where a prolonged period of ultra-low interest rates dampened volatility.
Large high-frequency trading companies first crammed into the crypto markets in 2017, when bitcoin prices soared. The majority of these companies have remained under the radar with their involvement in crypto until recently, quietly building their market share.
JPMorgan analysts estimated that at the end of last year, high-frequency traders were responsible for nearly 80% of bitcoin prices sent to exchanges, which is similar to their share in US government debt. . Many of these computerized traders target crypto “core” trading – the spread between the spot price and the price of derivatives.
But many now also want to attract over-the-counter transactions on behalf of institutional investors and act as an intermediary for transactions on decentralized networks in which transactions are not matched in a single location.
This puts them up against specialist crypto trading companies such as Genesis, B2C2, and Bequant, and potentially other exchanges. The U.S.-listed cryptocurrency exchange Coinbase said on Wednesday that it had applied to become a futures commission trader, which would allow it to handle customer futures orders.
For the latest fintech news and opinions from FT’s correspondent network around the world, sign up for our weekly newsletter #fintechFT
Register here in one click
GTS is in the process of setting up Radkl, a new company that will launch exclusive trading of digital assets later this year, from bitcoin to the rapidly growing decentralized financial market. Billionaire hedge fund manager Steven Cohen is also investing in Radkl.
Ari Rubenstein, chief executive of GTS, said he saw a “need for sophisticated, large-scale players able to navigate the regulatory environment.” He said these players would make the market “more efficient” and “attractive to investors”.
Jump Trading is setting up a separate unit of over 80 people focused on the growth and development of blockchain networks and digital coins. Kanav Kariya, chairman of the new unit, said Jump has spent decades building high-performance infrastructure. “We are bringing this muscle to crypto,” he added.