In a statement, Fidelity Investments said the European business will provide the ‘essential building blocks’ for digital asset investing including institutional-grade custody, and trade execution via a trading venue with multiple sources of liquidity, on a platform using the fund manager’s internal crossing engine and smart order router.

Chris Tyrer, a managing director at Barclays who led the bank’s digital assets project, will join Fidelity Investments as head of Fidelity Digital Assets in Europe to manage the new business and lead client service.

“Since launching Fidelity Digital Assets in the US over a year ago, we’ve seen significant interest and engagement by the institutional community, which show no signs of slowing,” said Tom Jessop, head of corporate business development for Fidelity Investments and president of Fidelity Digital Assets.

“We’re also encouraged by continued corporate and venture investment in market infrastructure companies as well as the entry of traditional exchanges into the digital assets ecosystem. These and other market indicators, alongside interest expressed from UK. and European client prospects, indicate a market with increasing potential which gives us the confidence to expand the digital assets business geographically.”

Fidelity Investments confirmed plans to launch a US-based cryptocurrency firm last year to support institutional investors engaging with digital assets, with custody and trade execution services. Fidelity has been exploring the use of blockchain and cryptocurrencies since 2014 via its Bitcoin Incubator.

“The demand we’ve seen for Fidelity’s digital asset custody and trade execution services has been borderless, and we’re scaling our business to operate in a variety of jurisdictions to support this industry for the long-term,” Tyrer, head of Fidelity Digital Assets in Europe, commented. “In doing so, we’re building on the commitment to make digitally-native assets, such as bitcoin, more accessible to institutional investors.”

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The buy-side may be keeping their crypto strategies largely under wraps for now, but Fidelity Investments was not one of them, announcing in October that it is set to launch a new company for the custody and trade execution of digital assets, appropriately named Fidelity Digital Assets.

It was not the only firm to focus on crypto custody this year, with Nomura beating the competition to the punch through the launch of its custody bank offering in May this year that aims to bring infrastructure and an operational framework for the wider investment manager industry. Northern Trust has also revealed it is exploring ways to hold and secure digital assets and cryptocurrencies for its hedge fund clients.

Elsewhere, SIX unveiled plans to launch a fully integrated trading, settlement and custody infrastructure for digital assets, which is currently set to launch next year. Jos Dijsselhof, CEO at SIX< spoke to The TRADE in more detail about the project and why he believes it could be a game-changer for the industry.

There have also been no shortage of industry executives making the jump to the good ship crypto this year, with LSEG veteran David Lester joining London-based cryptocurrency exchange Archax, and Nomura’s former global eFX trading head, Ed Mount, joining crypto brokerage and trading firm CRYPTALGO.

Whatever the coming year holds for the fortunes of cryptocurrencies, there should be little doubt about the capital market’s interest in this space. In July, advisory and research firm Aite Group forecast that the total trading value of cryptocurrencies will top $1 trillion in 2018.

Last but by no means least, there was the biggest news of all for the crypto markets in 2018: The launch of The TRADE Crypto, a new website which covers issues news on market infrastructure, regulation, volatility, custody, liquidity, safeguarding, new products, trading venues and more, as the leading source of information for cryptocurrencies and their place in the capital markets.

The post The TRADE’s best of 2018: Crypto appeared first on The TRADE.

Known as Fidelity Digital Assets, the company will offer trading and custody of cryptocurrencies to institutional investors such as hedge funds, family offices and market intermediaries, the $7.2 trillion asset manager said in a statement.

The firm added that although there are many retail service providers currently available in the market, there is a gap in support for institutions looking to enter the space, citing research from Greenwich Associates which found that 70% of institutional finance executives believe cryptocurrencies will have a place in the future of the industry.

“Our goal is to make digitally-native assets, such as bitcoin, more accessible to investors,” said Abigail Johnson, CEO of Fidelity Investments. “We expect to continue investing and experimenting, over the long-term, with ways to make this emerging asset class easier for our clients to understand and use.”

Fidelity Digital Assets will provide a secure and compliant storage solution for Bitcoin, ether and other digital assets, consisting of cold storage, multi-level physical and cyber controls for security. It will also use its internal crossing engine and smart order router for trade execution of cryptocurrencies, allowing for execution at multiple market venues.

“We started exploring blockchain and digital assets several years ago, and those efforts have been successful in helping us understand and advance our thinking around cryptocurrencies,” said Tom Jessop, head of Fidelity Digital Assets. “The creation of Fidelity Digital Assets is the first step in a long-term vision to create a full-service enterprise-grade platform for digital assets.”

Jessop added that institutions have told the asset manager that in order to engage with cryptocurrencies they need a trusted platform provider, with a sophisticated level of security and service similar to when trading stocks and bonds, to enter the space.

“With Fidelity Digital Assets, we’re building a scalable infrastructure for digital assets that meets the expectations of what it means to work with Fidelity, while leveraging unique capabilities of the blockchain to create a completely new offering,” Jessop concluded.

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A lack of regulatory clarity and a chequered past has made the institutional use of cryptocurrencies somewhat of a contentious topic. Subsequently, any comment or suggestion from an investment bank or asset manager is being interpreted as a firm indication of their stance.

The reality is, that for those in the upper echelons of the financial markets, any kind of investment phenomenon will be investigated in some way or another, regardless of intent to invest or trade. Whether its blockchain technology, exchange-traded funds (ETFs) or swaps, all new and innovative products are investigated before adoption.

BlackRock was the subject of such scrutiny on 16 July, after stories from Financial News and Bloomberg appeared to be in contradiction, with the former suggesting the asset manager had set up a working group to explore cryptocurrencies. Bloomberg then posted an interview with the BlackRock chief Larry Fink, who said there hadn’t been any client interest.

Both of these positions can co-exist, according to experts, who also say a handful of major players are also looking to establish their own cryptocurrency funds.

“On the traditional side of asset management some are talking about creating a fund which is a passive buy and hold strategy where they are allowing investors exposure to a basket of cryptocurrencies, essentially giving them easy access to this different asset class” says Ed Gouldstone, head of product management for Linedata’s asset management business.

“What I like about this is that it’s an area where asset managers can be innovative, they are starting to offer new products to their investors. It may be they are doing it on more of an individual client basis or test strategies themselves before an outright launch.”

Aite Group analyst, Gabriel Wang, recently authored a report on cryptocurrencies and says some asset managers confirmed to him they intended to launch their own crypto funds

“A couple of asset managers are looking to launch their own crypto investment funds, as they see the appeal of cryptos as an emerging asset class,” he says. “On the other side, trading orders have been flushing into OTC desks that handle crypto trades, mostly coming from hedge funds and prop trading shops right now.”

Speaking to The TRADE, one asset manager said they did not feel the need to be “first to the party” and that they have more to be getting on with than trying to understand the world of cryptos.

“As an institutional asset manager we don’t yet see underlying clients expressing much interest in cryptos,” they explained, adding that the ‘Wild West’ nature of the market is not ideal in the age of transparency. “In time though, once things are a lot clearer and possibly regulated, we may see a lot more client interest and look to get involved.”

The predominant issues facing asset managers remain the lack of regulatory clarity from global policymakers. For example there is still debate in the US over the classification of cryptocurrencies, whether they are securities or not. The answer to this will dictate which US body regulates them. However, this is just the top of a long list of barriers to entry.

Gradually market infrastructure players are bringing solutions to the table, but for cryptocurrency to be a viable option for asset managers there needs to be an ecosystem for a fully-functional buy-side landscape.

This should include custody, prime brokerage, fund accounting services, and portfolio analytics tools for a typical asset management industry.

“Institutional asset managers are sitting on the side-lines waiting for more regularity clarity and an appropriate investment vehicle,” said Richard Johnson, vice president of market structure and technology at Greenwich Associates “Speaking for the US market, both of these are beginning to emerge.

“In the meantime, many hedge funds are investing directly in the crypto space, and there are dozens of dedicated crypto funds. Some crypto funds are offering a crypto-index fund (e.g. top 20 coins). Asset managers could gain exposure to crypto by investing as an LP in one of these funds.”

Whether it’s cryptocurrencies themselves, the underlying blockchain technology or tokenisation of securities, there is no major financial institution in the world that isn’t conducting some form of exploration.

In time we may have a cryptocurrency market with all the necessary plumbing and infrastructure along with institutional money, but until then we are likely to continuously hear stories of various angles the major players are taking.

It’s reminiscent of news content in the run up to MiFID II about which asset managers had decided to absorb the costs of research or which firms had registered to operate a systematic internaliser, but ultimately no single stance will likely represent the entire industry.

The post The reality of what asset managers are really doing about cryptocurrencies appeared first on The TRADE.

Digital currency trading firm trueDigital was launched by Sunil Hirani, a capital markets veteran most recently known for founding swaps execution facility trueEx, a platform which took on some of the major players in the OTC derivatives world.

The rates can serve as an underlying reference for futures contracts, as the trend from firms looking to provide institutional-grade products continues.

The trueDigital reference rates, comprised of bid and offer pricing from top cryptocurrency market makers, include automated anti-manipulation safeguards such as outlier detection and price banding.

While reference rates such as Libor have gone through scandals in recent years, trueDigital said it has robust policies to “surveil potential manipulation and review the contributing sources on an ongoing basis in line with the IOSCO based methodology”.

“The digital asset market is still young, especially for financial institutions,” said Michael Moro of Genesis Global Trading. “trueDigital is methodically building the components needed to evolve this ecosystem and make it habitable for firms seeking exposure to digital assets. OTC indices are the next leap forward in the maturation of the market.”

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The report says that while the FSB does not consider crypto-asset markets to pose material risk of global financial stability, “supported vigilant monitoring in light of the speed of developments and data gaps” is necessary nonetheless.

In collaboration with the Committee on Payments and Market Infrastructures (CPMI), the FSB framework focuses on the transmission channels from crypto-asset markets.

“The objective of the framework is to identify any emerging financial stability concerns in a timely manner,” the FSB says in its report. “To this end, it includes risk metrics that are most likely to highlight such risks, using data from public sources where available. Supervisory data pertaining to crypto-assets are potentially more reliable and could complement data from public sources.”

The FSB’s framework includes a number of risk metrics that could impact financial stability, including trading volumes, pricing, clearing and margining for crypto-asset derivatives, as well as harder to measure metric such as confidence in the markets and the use of crypto-asset markets for payment or settlement.

However, the FSB also notes the complications of analysing crypto-asset market data, such as the lack of transparency concerning Initial Coin Offerings (ICOIs), unreliable data sources and the fragmented nature of crypto-asset markets.

“The crypto-asset market is rapidly evolving, as are public data sources. The treatment and characterisation of crypto-assets may vary across jurisdictions or may not yet have been clarified. Given that the proposed monitoring metrics are mainly based on public data, it should be stressed that the quality of the underlying data can vary, and might not always be satisfactory.”

The role of central banks will also play a pivotal role in the development of global crypto-asset markets, and the report recognises that central banks are currently reviewing the use of new technologies that underpin the use of digital currencies and central bank operated payment systems.

“However, responding directly to the challenge with a central bank digital currency (CBDC) would be an entry into uncharted territory,” the report concludes.

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Broadway Technology has expanded its services to include cryptocurrencies as another major asset class for its end-to-end FinTech tools, which are currently used by both buy and sell-side clients, including 20 of the world’s largest banks.

The company stated that while the cryptocurrency market has typically been tailored for retail investors, institutional investors looking to enter the space require fast adaptable and ‘future-proof’ trading systems.

Broadway Technology’s chief executive and high-frequency trading specialist, Tyler Moeller, emphasised that the cryptocurrency market has seen unprecedented growth of more than 800% over the past 12 months.

“Broadway is the only institutional-grade platform that is able to meet the needs of the next wave of professional traders entering the highly-fragmented crypto market,” he said.

“Institutional trading operations are coming to Broadway as a trusted long-term partner to deliver advanced cryptocurrency trading solutions that meet their immediate needs and can also adapt quickly as the market continues to evolve at a rapid pace.”

Jonathan Fieldman, chief operating officer at Broadway Technology, added that firm’s expansion into cryptocurrencies was a natural progression for its existing multi-asset services.

“With the proliferation of new cryptocurrencies and derivatives, the diversity of trading models and market participants, and the potential for regulation, Broadway is well positioned to lead the institutional market for crypto trading solutions,” Fieldman said.

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Speaking at a Bloomberg event in London, trade.io’s chief executive, Jim Preissler, made the announcement and said the firm is also hoping to launch its liquidity pool following the launch of the new exchange.

Users of the trade.io exchange will be able to use the firm’s cryptocurrency, Trade Tokens, for transactions across foreign exchange, commodities, precious metals and cryptocurrencies.

“The community has been eagerly waiting, so it gives me great pleasure to announce that we will finally launch on 17th July. It will be a staggered launch to 1,000 people initially, with future clients to be on-boarded in the days to follow,” said Preissler.

trade.io has been preparing for the launch of its exchange for some time, having recently introduced high-level security systems to fend off cyberattacks and hacks on the website and its users.

The security system includes functions such as, proprietary algorithms for ensuring security to the exchange funds and wallet, extensive risk assessments and an in-house cybersecurity team monitoring activity 24/7.

The firm’s chief technology officer, Charles Voltron, explained at the time that trade.io’s approach to securing the exchange has been holistic.

“Other than protecting the exchange with a multi-layered defence tactics, we are enhancing our employees’ awareness for cyber events, we protect our business processes and our internal technologies,” he said.

“When it comes to security, the trade.io team is firm on not cutting any corners and is committed to having an exchange that clients feel safe using.”

The post Blockchain provider to launch crypto exchange this month appeared first on The TRADE.

Ed Mount joins CRYPTALGO after launching a cloud technology, post-trade services firm, Elysium Technology Group.

He has formerly worked in FX trading at Nomura and Royal Bank of Scotland, but now specialises in automated database technologies, including blockchain and its application to FX, futures and crypto trading.

CRYPTALGO develops crypto brokerage, algo-trading, custody and investment for financial institutions. Its platform connects global cryptocurrency exchanges and looks to consolidate liquidity to offer firms the best price and best execution services for high-volume trading. 

Also joining the advisory board at CRYPTALGO is Jon Matonis, the former executive director and co-founder of the Bitcoin Foundation, and special advisor on cryptocurrency market intelligence. He has focused on expanding the circulation of non-political digital currencies, and is considered an expert in the crypto industry.

Other current members of CRYPALGO’s advisory board include John Winter, the former chief executive of Barclays Corporate Banking, and Michael Huttman, executive chairman of Millennium Global Investments.

“For us, 2018 has been a year of successful partnerships and significant appointments which underpin CRYPTALGO’s success and demonstrate to institutional investors the years of expertise and experience behind our offering,” said Francisco Portillejo Hoyos, CEO of CRYPTALGO.

“Jon and Ed are prominent leaders of their respective industries – having them on board enforces investor interest in the cryptocurrency and blockchain market and continues to align the high standards of practice that CRYPTALGO provides with that of our clients.”

The post Former global eFX trading head at Nomura joins crypto brokerage and trading firm appeared first on The TRADE.

A London-based cryptocurrency exchange targeting institutional investors has been backed by the former chief strategy officer at the London Stock Exchange Group (LSEG).

David Lester has joined Archax as an advisor and non-executive director, as the startup launches its institutional-grade digital asset exchange for both traditional and emerging institutional players. 

Institutional investors globally have so far taken a ‘wait-and-see’ approach to cryptocurrency trading, due to overwhelming concerns around regulation, custody, liquidity and volatility. 

The Archax exchange has been designed to legitimise the new marketplace for those institutions, using existing exchange infrastructure and a hosted datacentre. It will operate under regulatory and best practice principles in a bid to provide transparency for clients.

Graham Rodford, chief executive at Archax, explained that the current digital asset world is just the beginning, and the firm expects to increasingly see opportunities emerge as the world realises that “all assets can be tokenised”. 

“As this occurs, institutions will be looking for a way to realise their investment strategies in both new and traditional ways,” he said. “We have assembled a seasoned team and advisory board who understand the needs of institutions and who are used to operating in a highly regulated world – people from hedge funds, brokers, banks, exchanges, vendors and the academic space.”

Lester, who departed the LSEG in June last year after 16 years with the exchange operator, added that blockchain and tokenisation are innovations that have significant potential to disrupt and open up new business opportunities.

“Tokens can turn networks into markets, blockchains can enable more frictionless and transparent marketplaces.,” he commented. “How this evolves is of real interest to capital providers, business leaders and founders.

“I am pleased to be an advisor to Archax, a strong team of likeminded individuals whose mission is to bring global institutional capital to the crypto asset space, which will underpin and accelerate its adoption.”

The crypto exchange has already received a seed investment from digital currency fund, Alphabit. Archax concluded that by bringing in further interest, liquidity and investment from the institutional space, the startup exchange will look to become the established global, institutional, digital asset trading hub.

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