In a potentially controversial development, sources claim that the Singapore-based exchange Crypto.com has employed internal teams to trade tokens for profits. This practice is different from most markets, where separate private companies are typically responsible for market-making and prop trading activities. Additionally, exchanges usually match buyers with sellers at the most competitive and transparent prices.
US regulators are tightening the screws on exchanges that support internal market-making activities. Earlier this month, the US Securities and Exchange Commission (SEC) charged crypto exchange Binance for manipulating trading volumes by using a trading firm operated by its CEO, Changpeng Zhao. In response, the SEC Chair Gary Gensler claimed that it is uncommon for the New York Stock Exchange to also operate a hedge fund while making markets.
Claims about internal trades at Crypto.com have remained under the radar since its 2016 launch. However, sources reveal that the platform’s executives emphatically denied any involvement in trading, while another source alleges that the exchange asked employees to deny their involvement in an internal market-maker operation.
Crypto.com defended its practices, stating, “We have an internal market maker that operates on the Crypto.com exchange and that internal market maker is treated exactly the same as third-party market makers that identically facilitate tight spreads and efficient markets on our platform. This is not a controversial practice.”
The company claims that most of its earnings come from its app designed for retail traders, where it acts as a counterparty for transactions and operates as a broker model. Crypto.com added that its trading team ensures risk neutrality by hedging positions on various venues, including its exchange. Moreover, the company stresses that it operates as a level playing field trading venue.
However, sources claim that Crypto.com‘s proprietary trading desk trades on both its own exchange and other venues. It appears that the market-making desk aims to boost liquidity, while the proprietary trading team’s sole goal is to make money and not facilitate an exchange. In response, Crypto.com argues that all trading industry participants compare volumes with competitors and express their commitment to improving order book liquidity while lowering spreads, creating an efficient market for everyone involved.
Source: Coingape
