ErisX, the Chicago-based crypto exchange, is in the final testing phase before launching its spot crypto trading product offering. The news is that it is also testing with a number of its strategic partners in order to finalize operating protocols before the big day. Since TD Ameritrade and a few other notables are known to be investors in the exchange, the presumption is that the large online broker is about to offer crypto trading to its 11 million-strong customer base, a shot that will be heard around the world, so to speak.
ErisX was formed in October of 2018, as the successor to Eris Exchange, a designated contract market that listed interest rate swap futures products. The announced plan was that the succeeding exchange would soon trade and clear cryptocurrency futures contracts at some point in the future, after the necessary approvals had been obtained from the Commodities Futures Trading Commission (CFTC). The goal that was announced at the time was that crypto offerings would begin second quarter of 2019.
A spokeswoman for ErisX noted that the exchange is indeed “gearing up to launch its market for spot crypto trading.” She went on to explain:
Testing is a best-practice necessary for us and our customers as we build the most robust and transparent marketplace for digital assets.” Although the spokeswoman would not disclose the names of any partners involved in the testing program, she was willing to admit that: “The firm has been in a production environment with a limited number of participants to optimize the process in advance of our public launch.
ErisX will be entering the crypto space as a fully regulated exchange, designed to accommodate institutional investors and their special needs. After its second round of funding in December, it was reported that:
During its first round, ErisX had attracted the participation of the likes of TD Ameritrade, Virtu Financial, and the CBOE options exchange. The stage is set to launch the premier model of a crypto exchange in the second quarter of 2019. ErisX has noted on its website that it intends to offer both spot cryptocurrency trading and futures contracts, with initial support for Bitcoin (BTC), Bitcoin Cash (BCH), Ethereum (ETH), and Litecoin (LTC).
Interestingly enough, a direct competitor of TD Ameritrade did not waste any time making it known that it, too, was jumping into the crypto arena, as well. According to the New York Times journalist Nathaniel Popper, eTrade, a US-based major financial assets and stocks exchange, is also in the last phases of launching its bitcoin and ethereum trading product for its 5 million users:
In the wake of TD Ameritrade quietly opening Bitcoin trading for some of its customers, I was just told that eTrade is preparing to begin offering both Bitcoin and Ether trading to its 5 million or so customers and is just finalizing a third party to actually hold the coins.
Two issues have plagued cryptocurrency trading since its inception – liquidity and the reporting of fake volumes. In a recent report to the SEC, Bitwise revealed that nearly 95% of crypto volumes shown on aggregator websites is fake or inflated by exchanges, primarily in Asia, to gain consumer attention and achieve higher industry rankings. The Top Ten exchanges with over $1 million in daily volume are said to report “real” volume data, and half of this volume tends to be in the futures market. The entry of ErisX and the likes of TD Ameritrade and eTrade could swell daily volume data, and thereby increase liquidity for tokens like Bitcoin and Ethereum. A side benefit would also be reduced volatility, another issue that disturbs both the SEC and institutional investors.
Joseph Young, an analyst who focuses on finance, cryptocurrency, and Fintech, explained:
Although eTrade and TD Ameritrade are still at an experimental phase, the potential integration of crypto assets like bitcoin and ethereum by the two major trading platforms could result in a noticeable increase in the real volume of bitcoin, in a strictly regulated and transparent environment, which would raise the quality of the liquidity of the asset.