Understanding EDX Markets: 10 questions about behind-the-scenes investors, compliance, and more after a night on the headlines10 questions about EDX markets, including investors, compliance, and more, following recent news coverage.
Author: Blocking cryptonaitive
Crypto Never Sleeps.
In June 2022, two market-making giants, Citadel Securities and Virtu Financial, announced that they are developing a crypto product with the help of Fidelity Investments and Jiaxin Wealth Management to increase the channels for acquiring digital assets.
After a year of preparation, the cryptocurrency trading platform EDX Markets announced on June 20, 2023 that it has started trading, immediately making headlines in the industry.
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When it was discovered that EDX Markets was supported by Wall Street’s top financial consortia, such as Citadel Securities, Sequoia Capital, Fidelity, Jiaxin Wealth Management, Blockingradigm, GTS, and GSR Markets, the cryptocurrency market reversed the slump of the past few days, and the price of Bitcoin once broke through $29,000.
What is EDX Markets, a new cryptocurrency market platform? Why does it have such a huge impact? Blocking journalist cryptonaitive answers what kind of cryptocurrency market EDX Markets is with 10 questions.
1. Why was EDX Markets established?
According to the EDX Markets website, EDX Markets is a new digital asset market designed to meet the needs of native cryptographic companies and the world’s largest financial institutions, enabling secure and efficient digital asset trading and clearing on a dedicated cryptographic platform for traditional financial markets.
2. What is the difference between EDX Markets and mainstream cryptocurrency exchanges?
Unlike the practice of mainstream cryptocurrency exchanges that integrate custody, trading, and clearing, EDX Markets does not custody customers’ digital assets, nor does it directly face retail customers, but instead uses a method similar to executing trades on the NYSE or Nasdaq through financial intermediaries to buy and sell cryptographic assets. In addition, EDX Markets will launch EDX Clearing later this year to settle trades matched on EDX Markets.
In the bilateral settlement stage, EDX Markets acts as a clearing agent, calculating the settlement obligations between the parties and notifying each member and authorized custodian member which counterparty they traded with and the amount of the trade. Members can independently own their own trading data to verify the settlement calculations made by EDX Markets. EDX Markets does not participate in the transfer of any legal currency pair (cash) or tokens, which is only done through authorized custodians. Similarly, EDX Markets does not participate in the flow of funds. Settlements will be made based on legal agreements between members and their authorized custodians, rather than being traced back to EDX Markets.
Therefore, the revenue source of EDX Markets will come from membership fees or service fees from financial intermediaries. Currently, EDX Markets is operating temporarily without membership fees (fee holiday).
3. Who are the investors of EDX Markets?
EDX Markets has been supported by major financial institutions. The founding investors of EDX Markets include Citadel Securities, Fidelity Digital Assets, Blockingradigm, Sequoia, Virtu Financial, Charles R. Schwab, and others.
According to the EDX Markets press release on June 20th, EDX Markets recently completed a new round of financing and welcomed more strategic investors, including Miami International Holdings, DV Crypto, GTS, GSR Markets LTD, and HRT Technology.
4. Who is the major shareholder behind EDX Markets?
Citadel Securities. Let’s take a look at the organizational structure of EDX Markets.
The CEO of EDX Markets is Jamil Nazarali, who was previously employed by Citadel Securities. Prior to this position, Jamil held several positions at Citadel Securities, including Global Head of Business Development and Head of Citadel Execution Services. Previously, Jamil was the Global Head of Electronic Trading at Knight Capital Group and worked as a management consultant at Ernst & Young and Bain & Company. Jamil has held multiple industry and board positions, including Chairman of the Members Exchange (MEMX) Board, Member of the U.S. Securities and Exchange Commission’s (SEC) Stock Market Structure Advisory Committee, and Member of the BATS Holdings Board.
The Chairman of the Board of EDX Markets is Peng Zhao. Peng Zhao is the CEO of Citadel Securities, the number one market maker on Wall Street, headquartered in Chicago. 27% of U.S. stock market trades are processed by Citadel Securities’ automated trading platform. Peng Zhao was born in Beijing and joined the company directly after receiving his doctorate degree from the University of California, Berkeley, serving as a senior quantitative researcher. He is one of the early veterans of Citadel Securities and became its CEO in 2017. Today, Citadel Securities has over 1,000 professionals worldwide and provides liquidity in more than 120 locations across 35+ countries.
According to the recruitment information on the EDX Markets official website, EDX Markets is hiring engineers based in Chicago, which is consistent with Citadel Securities’ headquarters in Chicago.
5. Who are Citadel and Citadel Securities? How are they related to the crypto market?
Citadel Group was founded in 1990 and is one of the most successful and respected alternative asset investment companies in the world. Citadel Investment Group has two main businesses: Citadel and Citadel Securities. Citadel is a leading global hedge fund with assets under management of over $38 billion; Citadel Securities is a leading global market maker, providing 27% of the trading volume on the US stock market.
When it comes to Citadel, people in the crypto industry are not strangers. For example, PeopelDAO (formerly ConstitutionDAO) was created because Citadel Group founder Griffin bid $43 million to purchase a copy of the US Constitution in 2022; Citadel Securities completed a $1.15 billion financing round in early 2022 at a valuation of $22 billion, led by Sequoia Capital and crypto VC firm Blockinradigm, marking the first time it has accepted outside investment since its founding; Citadel Securities is one of the main market makers on Robinhood, which has a large number of cryptocurrency transactions.
Griffin, the founder of Citadel Group, previously opposed cryptocurrency but later changed his attitude. In 2023, he said, ” In the past fifteen years, cryptocurrency has been one of the greatest stories in the financial sector … Citadel Investment will enter the cryptocurrency market this year and hopes to include crypto assets in the company’s global market strategy in the coming months.”
6. Is EDX Markets a compliant exchange?
EDX Markets explicitly states that EDX Markets is not registered with the US Securities and Exchange Commission (SEC) or the Financial Industry Regulatory Authority (FINRA).
7. Which cryptocurrencies can be traded on EDX Markets?
EDX Markets currently offers spot trading for four trading pairs: BTC, ETH, LTC, and BCH. Except for ETH, all others are PoW tokens.
EDX Markets CEO Jamil Nazarali stated in April 2023, “EDX Markets only offers a limited set of token trades because we don’t want to trade things that may become securities until regulation is clearer. “
8. Who can join EDX Markets as a member?
As answered in the second question, only institutions can apply to become EDX members, individuals cannot. Therefore, EDX does not offer direct retail accounts.
9. How to become a member institution of EDX Markets?
Step one, member registration: Send an email to [email protected] with your company name and contact information or fill out the inquiry form.
Step two, coordination access meeting: The EDX member team will contact you to arrange an introductory meeting with the EDX business development team to discuss your company’s goals, answer questions, and arrange initial technical access meetings.
Step three, technical access: Your company will be introduced to the EDX technical access team, which will guide you through the connection and authentication process and discuss network connectivity, application interfaces, functionality, and operational issues.
Step four, prepare to trade: The EDX technical team will coordinate consistency testing for your trading application and guide you through the setup in the member portal.
10. Does EDX Markets have an app?
As mentioned in questions 2 and 8, EDX Markets does not offer an app frontend or trading GUI. Trading access can only be done through APIs.
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