Reuters / Kai Pfaffenbach
A trader, telling his friend about the cool new way he's been hedging the stock market.
- Jump Trading, a Chicago-based firm, has built an OTC platform for electronic bitcoin trading, according to people familiar with the matter.
- Its graphics user interface, or GUI, allows it to trade with counterparties electronically in a way that leaves a clear audit trail and records, rather than via phones or Skype.
- The development shows the company is seriously exploring the crypto market and is a sign that market is maturing.
Cryptocurrencies are viewed by many evangelists as one of the most groundbreaking financial innovations of the modern age. But the way crypto trades looks like something out of an old school Wall Street flick.
For the most part, trading firms are making nine-figure crypto trades over-the-phone, not electronically. DRW's crypto arm Cumberland uses Skype calls to conduct its bitcoin deal-making, Reuters reported.
But Jump Trading, the Chicago-based firm, has built a platform that will allow it to take the other side of large crypto trades electronically with its counterparties, according to people familiar with the matter. The so-called graphic user interface or GUI allows those counterparties to interact with Jump on a desktop. It does not allow users to connect to external trading exchanges.
Jump is known for its ultra high-speed trading strategies, but it's also been developing what it calls a "lower frequency trading strategy." It's also known for its discretion, with little information on the firm available on its website.
The new platform shows that Jump is taking the new market for cryptocurrencies seriously, according to a person familiar with the firm's thinking. Also, the firm believes that voice and chatroom environments don't leave a clear audit trail, the person said.
Jump Capital, the venture capital firm affiliated with Jump Trading, has made crypto a focus for 2018, as previously reported by Business Insider.
"GUI's are not unique," Michael Dunworth, the chief executive of Wyre, a blockchain tech company, told Business Insider. "But it is impressive that Jump built it."
The move shows the cryptocurrency market is maturing in a similar way to the now multi-trillion dollar foreign exchange market, which in its earliest days saw trades conducted mostly over the phone, says John Spallanzani, a former FX trader at Sumitomo Mitsui who is now a portfolio manager at Miller Value Partners.
"We used to call 20 banks at once for spot FX prices," Spallanzani, said of forex trading in the 1990s.
"It's without doubt maturing just by the fact that there's so many OTC desk's out in the mix," Dunworth added.
Kraken, the crypto exchange, set up an OTC desk in New York, Business Insider first reported. There's also Genesis Global Trading and itBit, the OTC run by Paxos.
At the same time, crypto-focused investment funds are opening up at a record-pace, according to new research by CryptoFundResearch. 61 new funds have launched in 2018, according to firm's research, bringing the total number above 366 globally. To be sure, such funds manage in total a paltry $5 billion, a fraction of the $3.2 trillion managed by the entire hedge fund industry.