Founded in 1817, the world's largest stock exchange, the New York Stock Exchange (NYSE), has served the stock exchange for more than 200 years, with listed companies having a global market capitalization of $15 trillion. Founded in 1971, NASDAQ is the world's first electronic stock exchange market. It grew into the world's second largest stock exchange in just over a decade, and even surpassed the NYSE in the 1990s. In 2018, the two traditional stock exchanges did the same thing in the same way: entering the digital currency market .
In August 2018, the New York Stock Exchange's parent company, the Intercontinental Exchange (ICE), founded the cryptocurrency futures exchange Bakkt . From the announcement of the news to the final launch, Bakkt's every move touched the hearts of many cryptocurrency traders. Insiders believe that Bakkt's flagship financial instruments have the potential to bring about dramatic changes in the bitcoin market in nature, especially in terms of market participants, liquidity and supply and demand trends, which are considered to be the engines that drive Bitcoin to new heights.
In December 2018, Nasdaq announced the investment in the cryptocurrency exchange ErisX . Compared to Bakkt, although ErisX is standing behind Nasdaq, CBOE, CME, Fidelity and TD Ameritrade, one of the largest Internet brokers in the United States, it is relatively unknown. But it was approved by the US Commodity Futures Trading Commission (CFTC) earlier than Bakkt, and it can also launch compliant bitcoin futures.
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NYSE and Nasdaq are eager to enter, and the London Stock Exchange (LSE), Europe's largest stock exchange, is also unwilling to fall behind. In January 2019, the London Stock Exchange Group (LSEG) announced the technology-driven drive for the Atom Asset Exchange (AX Exchange) to enter the digital currency market in a “curve admission” manner.
The three major exchanges enter, the path is completely different
The three major exchanges entered, but chose a completely different cut-in path. ICE founded Bakkt to participate in the digital currency market through its subsidiaries; Nasdaq chose to participate in the ErisX B+ round of financing, and involved in equity investment; while the Exchange Office (LSE) provided technology-driven AAX. The first two are easy to understand, so what about providing technical drivers?
System performance is one of the exchange's core competencies. LSE's Millennium blending engine technology is a professional engine for institutional users. It has been used in more than 40 traditional financial markets around the world, including the first-tier markets such as the Singapore Stock Exchange and the Hong Kong Stock Exchange. Looking at the specific parameters found, the engine features: high concurrency, can process millions of transactions per second; low latency, each interval is 0.0001 seconds; high stability, accuracy can reach 99.999%. As a result, ordinary digital currency traders can also enjoy an institutional level trading experience.
In addition to technology, LSE's premium brands can bring new impetus to the digital currency trading market. Founded in 1801, LSE has been trading stocks for more than 200 years and is one of the oldest stock exchanges in the world. The Partner Network of the Stock Exchange has more than 300 partner institutions, including large financial institutions, regulators, and banking and financial giants such as Merrill Lynch, Morgan Stanley, Goldman Sachs, UBS and CICC. AAX is also on the list and has the highest priority, and is expected to introduce the European region to the digital currency market, especially for institutional investors in the UK.
In addition, the extensive operating experience of the Stock Exchange is also worth learning from the digital currency market. Although the market still faces the problem of lack of supervision and unclear regulation, compliance is a general trend. The industry needs to learn how to operate the exchange platform in the form of regulation, compliance, monitoring and auditing . Through AAX, LSE can put the trading rules and trading experience of mature securities market into practice in the digital currency trading market, and continuously improve it, which will eventually lead to the standardization of the entire industry.
How many LSEs do you choose, why is it ultimately AAX?
With profound knowledge, advanced technology and mature operations, the choice of the Exchange to provide a technology-driven way to enter the digital currency market is actually the “sweet” in the eyes of many potential partners. So why did LSE finally choose AAX?
The first is positioning. The digital currency market has developed rapidly, especially in the ICO boom of 2017 and 2018, when a large number of exchanges entered the cryptocurrency market. In the eyes of AAX CEO Thor Chan, “Many exchanges are not centered on trading, with the market as the core. Many platforms come when they come to ICO, or in order to send a coin, they make a trade exchange themselves.” AAX looks at the long-term market, and the positioning and goals of the "protracted war" coincide with the LSE.
“Compared to building a first-class exchange, we value user confidence and recognition of our brand. This may be a more important business indicator than trading volume.”
The professionalism of the team is also essential. AAX core team members have working or collaborating on the London Stock Exchange and have a deep understanding of the culture and technology of the London Stock Exchange. AAX has a set of standardization processes for compliance, transparency, and operational strategy. At the same time, in the process of putting the traditional financial market matching system into the digital money market, the technical team's excellent quality has also been recognized and recognized by the LSE.
Again, it is compliance. AAX refers to the UK FCA (British Financial Conduct Authority) regulatory framework to strengthen internal self-regulation . In addition, AAX is actively applying for licenses in multiple regions and markets around the world. "If we don't have a self-monitoring framework at the beginning of the first day, there is no internal control process, there is no compliance framework, and if we go to get a license later, or if we expand again, it will be very big. risks of."
In terms of security, AAX has partnered with Kroll, the world's leading provider of risk solutions, and has received CCSS cryptocurrency security certification . Since 1972, Kroll has been providing risk solutions to financial institutions, software and the Internet, law firms and government agencies around the world. As Managing Director of Kroll and Head of Network Risk in Asia Pacific, Paul Jackson has more than 25 years of experience in cybersecurity, strategy and thinking, providing excellent support for AAX security.
Bakkt is unfavorable. Where does AAX go?
Among the three trading platforms, ErisX's futures trading is still not online, and Bakkt and AAX can't help but directly compare them. It is often said that the greater the hope, the greater the disappointment. The high volume of Bakkt, which was highly anticipated, was only 72 BTCs on the first day of trading. In the following month, the trading volume remained sluggish. Bakkt is unfavorable. Where is the AAX just going online?
In this regard, AAX CEO Thor Chan is not worried. He believes that although Bakkt's initial performance was not as good as expected, it cannot be concluded immediately. "We can't judge it at the level of 10 or 20 years because of the trading volume of one month or two months. The admission of traditional exchanges has proved their confidence in the digital currency, indicating their willingness to invest in the long run. At this point, Bakkt's parent company ICE and LSE agree."
Subsequent development seems to confirm Thor's judgment. In the second month of the launch, Bakkt's daily trading volume increased significantly. On the last trading day of last week (November 8th), Bakkt traded a total of 1,756 bitcoin futures contracts on official tweets on the day of the announcement, with a transaction volume of $15.5 million, a record high . Although the transaction volume is currently only about 10% of CME ($153 million), the amazing growth rate is enough to predict the future of Bakkt and the future of AAX.
At the same time, Bakkt's choice of operational strategy also gave AAX some inspiration. Bakkt follows the traditional brokerage account opening mode. The threshold is high and requires qualified brokers. Investors who want to invest in Bitcoin can only contact their brokers. For Chinese users, the entry barrier is very high. Therefore, AAX does not adopt this model, but is committed to lowering the trading threshold so that ordinary users and institutional users can trade in an organization-level environment .
In the long run, the development of the digital currency market will be consistent with the secondary market of traditional financial markets, and many derivatives will be derived from digital currencies. "Currently the market's heat and liquidity are mainly based on futures contracts," so AAX also launched perpetual contract products for users' demand and trading habits. On the other hand, Thor believes that the top 100 digital currency may now account for more than 90% of the transaction volume and market value, the market diversity is insufficient, and most assets and bitcoin are highly correlated. “For real index products, market conditions are not mature enough.”
“AAX has to connect with traditional financial markets. We are not saying that we want to subvert traditional financial markets, but to integrate traditional financial markets, so that different traditional financial market sectors can participate in the new asset class of digital currency. AAX hopes to use traditional stocks, Foreign exchange and futures attract incremental users and develop trading products for these users."
Facing the future, asset digitization or the trend of the times. From a longer-term perspective, AAX is based on becoming a digital asset trading platform in a broader sense.
“We hope that all assets in the future will be digitized and can be traded on the AAX platform.”