An innovative new world is emerging for Crypto Prime Brokerage

In the wake of the recent  $4.3 billion settlement by the world’s largest exchange, the crypto prime brokerage landscape is confronting pivotal challenges in 2024. Traditional crypto prime brokerage models, reliant on sub-account renting are faltering amid stringent KYC/AML regulations, and presenting further challenges to trading firms in the market already experiencing fragmented liquidity, reduced lending services and a lack of universal infrastructure standards.

The key to addressing these perennial challenges while keeping abreast of regulatory expectations lies in the evolution of a more responsive next-generation technology stack.

Systems Upgrade

Smart Order Routing (SOR) technology innovation is revolutionizing crypto prime brokerage. It functions as a 'Chinese wall' between exchanges and trading firms. This innovation allows traders to access compliant and capital-efficient trading, eliminating the need to access exchanges' trading APIs and moving beyond the traditional prime broker model. When this advanced SOR is coupled with data-center co-location and latency-optimized technology, traders can achieve extremely low latency. This not only rivals elite HFT firms but also enables low execution cost, compliant, and low-latency trading across multiple trading venues such as Binance, OKX, Bybit and others, effectively harnessing fragmented liquidity and allowing firms to access unique trading opportunities.

The evolution continues towards seamless market access, enhancing capital efficiency, all while taking advantage of off-exchange settlement and lending facilities. Such innovation will also enable traders to benefit from potential netting effects, which will require less margin capital to be deployed at the exchanges, thereby reducing counterparty risk and improving capital efficiency even further.

Global Head of Prime Brokerage at Matrixport, Daniel Egloff says: “Trading firms will be able to have unified access across spot, perpetual swaps, and futures markets, all with minimal microsecond latency. This will significantly benefit firms running cross-exchange, statistical and funding rate arbitrage, along with basis traders and market makers requiring rebates and low-taker fees.”

API Standardisation


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