B2C2, a cryptocurrency liquidity provider, has launched streaming pricing with point-and-click execution on its OTC platform.
For the first time, B2C2’s clients will be able to view and execute trades on a real-time, two-way market via the firm’s secure web interface. The new functionality allows market participants to monitor live pricing in user defined quantities and execute with the click of a button, as they would on traditional FX trading platforms.
Speaking to Profit & Loss about the launch, Phillip Gillespie, CEO of B2C2 Japan, says: “We were one of the first firms to issue RFQ trading electronically and we already have a web portal where clients can go for trading and settlement. What we have done now is the next step forward, so that when a client goes onto the web-based GUI, not only do they have the RFQ and settlement request, but they can also see continuously streaming, two-way pricing.”
He adds: “This really brings us closer to the FX world where clients are used to transparent pricing and consistent liquidity coupled with ease of execution.”
Gillespie acknowledges that there are already some offerings in the crypto market that enable clients to receive streaming prices, but says that most of these are white labelled products or the prices are provided via an aggregator. By contrast, he points out that B2C2 developed its streaming service in-house to provide clients with a “one-stop shop” where they can execute and settle OTC cryptocurrency transactions.
By offering streaming pricing, Gillespie says that B2C2 will be able to definitively demonstrate how strong its pricing is relative to the broader crypto markets.
“Crypto is interesting because there’s no primary market per se. There are exchanges all over the place leading to fragmented liquidity and inconsistent pricing. When a client trades via RFQ, the competitiveness of the pricing might sometimes be unclear – the price they receive might be worse compared to one exchange, but much better than another,” he says. “So by offering two-way pricing, we’re really showing our hand and saying: ‘Look at how good our pricing is. If you want to trade, we are here to consistently provide you with tight pricing and firm liquidity, 24/7’. This is a big thing for existing clients and potential new ones, because clients want transparency and straight forward execution.”
Interestingly, when discussing the evolution of the cryptocurrency markets, Gillespie – who, before joining B2C2, worked as part of the FX systematic market making teams at Goldman Sachs, JP Morgan and Barclays – sees parallels to how the traditional foreign exchange market developed.
“If you look at how FX architecture evolved from the 1980s through the 1990s to now, I think that you’ll see a similar development in the crypto space. Right now, there are so many crypto exchanges, and although the OTC market is growing, I think it is exchange dominated. By contrast, if you look at FX or commodities, the vast majority of trading takes place OTC,” he says.
Gillespie continues: “Now to be a true liquidity provider, you need to be creating your own pricing. The way to do this is to look at the primary exchanges in the market, calculate where you think the real mid of the market is and then create a spread around it. This methodology was first created in the FX world – any systematic market making or high frequency trading has to come from being able to generate your own price and liquidity.”
Thus, one reason why the OTC volumes are smaller than exchange traded volumes in the crypto space, according to Gillespie, is that liquidity is fragmented across too many different venues for some OTC market makers to be able to trade effectively. Many OTC providers are simply aggregating exchange liquidity and passing it back to clients. However, he predicts that this is likely to change and that as a result, crypto markets will come to much more resemble today’s FX market.
“In order to be a true OTC liquidity provider, you need good exchanges, but you don’t need a lot of them. The crypto world is still so fragmented right now and there are exchanges everywhere creating pockets of liquidity, but I think that what will happen is that exchanges will start consolidating and as this happens, more and more OTC players will come into the market. And as a result, eventually the OTC volumes will overtake the exchanges. I guarantee you that’s how things will evolve,” says Gillespie.