LONDON and CHICAGO – April 5, 2023 Crypto derivatives market participants are set to increase their use of third-party trading technology as the quality and sophistication of the products on offer continues to increase, a newly published study by Acuiti has found.
The whitepaper Changing Approaches to Crypto Trading Technology is based on a survey conducted in Q4 2022 of Acuiti’s Crypto Derivatives Expert Network and is published today in partnership with Trading Technologies, a global capital markets technology platform provider.
Historically, proprietary trading firms, hedge funds and asset managers entering the crypto derivatives markets have tended towards inhouse builds owing to a relative lack of third-party offerings in the market.
However, the Acuiti study found that firms experienced challenges in building technology inhouse, in particular when it came to trading execution, risk management and market data tools.
As the quality and sophistication of third-party offerings in the crypto derivatives market increases, firms are likely to increasingly look to third parties, the study predicts. This trend is likely to accelerate as crypto-native firms expand into traditional asset classes.
Other key findings include:
- Crypto derivatives market participants would welcome increased involvement from traditional sell-side firms with balance sheet and reputation the key benefits they would bring
- A significant majority of firms execute most of their trading on exchange via a central limit order book, but over-the-counter (OTC) volumes are expected to increase
- Over a third of crypto-native firms are set to expand into traditional asset classes
“The crypto market grew from nothing to a multi-trillion dollar market in a short space of time,” says Will Mitting, founder of Acuiti. “One result of this was that the quality and sophistication of third-party technologies often lagged the inhouse builds of the early pioneers.
“Today there are many institutional-quality third-party offerings in the market and more being launched. This is lowering the barrier to entry for firms coming into the market and tilting the calculus in favour of third-party development for both incumbents and new entrants.”
“The survey respondents made it clear that third-party support of their crypto trading expansion plans can both ease their burden and help them achieve their goals at the pace that’s comfortable for them,” said Jason Shaffer, Trading Technologies EVP Product Development and Head of Americas. “These findings are aligned with what we’re hearing from customers who are working with us on the expansion of our crypto offering. They view our advanced toolset for professional and institutional trading – combined with expanded market access – as a superior alternative to creating and maintaining inhouse systems.”
Download full report here: https://www.acuiti.io/changing-approaches-to-crypto-trading-technology.
About Acuiti
Acuiti is a management intelligence platform designed to provide Senior Industry Professionals in the Derivatives Industry with high-value insight into industry-wide performance and business operations. Acuiti provides a platform through which our exclusive network of Senior Industry Executives can share and source information on day-to-day operational challenges, providing them and their management teams with increased transparency and in-depth analysis to make more informed decisions and benchmark company performance. Financial Institutions benefiting from our services include Banks, Non-bank FCMs, Brokers, Proprietary Trading Firms, Hedge Funds and Asset Managers.
About Trading Technologies
Trading Technologies (www.tradingtechnologies.com) is a Software-as-a-Service (SaaS) technology platform provider to the global capital markets industry. The company’s award-winning TT® platform connects to the world’s major international exchanges and liquidity venues in listed derivatives alongside a growing number of asset classes, including fixed income. The TT platform delivers advanced tools for trade execution and order management, market data solutions, analytics, trade surveillance, risk management and infrastructure services to the world’s leading sell-side institutions, buy-side firms and exchanges. The company’s blue-chip client base includes the Tier 1 banks as well as brokers, money managers, hedge funds, proprietary traders, Commodity Trading Advisors (CTAs), commercial hedgers and risk managers. These firms rely on the TT ecosystem to manage their end-to-end trading operations. In addition, exchanges utilize TT’s technology to deliver innovative solutions to their market participants. TT also strategically partners with technology companies to make their complementary offerings available to Trading Technologies’ global client base through the TT ecosystem.