In a new collaboration, customers of Hidden Road, a prime brokerage and trading services provider, are set to gain access to the crypto trading platform run by Crossover Markets. The goal of the partnership is to avoid conflicts of interest by separating trade execution from custody and brokerage services. This allows institutions to have greater freedom in choosing their own credit counterparties.
Crossover operates an “execution-only” platform, meaning customers require a credit sponsor to trade. Unlike centralized exchanges, it does not facilitate account creation or fund transfers – only trade execution. This contrasts with traditional centralized exchanges where users can open accounts and send money for settlement or exchange purposes.
The move comes amid growing concerns among traditional financial institutions over engaging with centralized exchanges in the wake of the fall of major crypto exchange FTX and increasing hostility from U.S. regulators. Many institutions are now seeking ways to trade cryptocurrencies as they would with other traditional asset classes, according to Crossover’s CEO, Brandon Mulvihill.
Customers of Hidden Road will soon have access to CROSSx, Crossover’s execution-only communication network (ECN) for executing cryptocurrency spot transactions. Hidden Road is the first firm to onboard with CROSSx, which launched in March. Mulvihill revealed that around 50 customers are currently in the process of onboarding, with 60% of these from traditional finance companies and the remainder being crypto-native.
While the collaboration offers a more streamlined approach for institutions to trade cryptocurrencies, it also raises questions about the potential limitations of an execution-only trading platform. Customers cannot directly send or receive funds, which could pose challenges in terms of liquidity and settlement times. This may, in turn, hinder their ability to effectively manage their risk exposure in the fast-paced and volatile crypto market.
However, Mulvihill remains optimistic about the partnership’s potential impact on the industry. “We believe this significant removal of operational friction from the ecosystem will materially increase trading volumes and decrease the costs of trading,” he said.
With the backing of prominent investors, such as Flow Traders, Nomuera’s Laser Digital, and Wintermute Ventures, it is clear that there is significant interest and confidence in Crossover’s endeavors. As their partnership with Hidden Road gets underway, all eyes will be on the platform to see whether this innovative approach can truly solve various dilemmas facing the world of crypto trading.