Jamil Nazarali, chief executive of EDX Markets, said trading volumes rose more than 25-fold in the fourth quarter of 2023 from the previous quarter after the spot crypto venue rolled out clearing.

The  firm launched EDX Clearing for spot crypto in October 2023.  Nazarali believes that clearing is a big differentiator as counterparty risk is becoming increasingly important as large institutions start trading crypto.

Nazarali told Markets Media: “In order to make sure that you get the best price when trading, you want to be able to trade with as many people as possible. Part of the value proposition at EDX is that clearing allows you to trade with everyone.”

In clearing spot trades, EDX acts as a central counterparty between the buyer and seller so members do not need to set up credit lines and bilateral agreements with each other in order to trade. All trades matched on EDX’s spot market settle on a blockchain through EDX Clearing in a single net process, increasing operational efficiency and reducing the upfront capital required to trade.  Assets are held in a network of independent digital custodians, in a similar way to traditional finance.

Nazarali said: “EDX Clearing only clears our marketplace right now. However, several firms have approached us about using EDXC and that is  something we are  considering.”

In the first quarter of 2024 EDX traded and cleared $12bn in notional volume, counting both the buyer and seller to any trade, which was a five-fold increase over the previous quarter, according to Nazarali.

“I think we have taken market share,” he added. “The companies on our platform are trading more and we are continuing to add institutional customers.”

EDX provides separate quotes  for institutions and retail intermediaries. Nazarali believes that trading volumes from retail intermediaries will be boosted  by the launch of spot Bitcoin exchange-traded funds in the US.

“ETF have energised the crypto space,” said Nazarali. “Even people who do not directly own the ETFs are trading more in  crypto.

International growth

EDX can provide an end-to-end process for spot crypto in the US, from execution through to clearing and settlement.

In May 2024 the firm announced the launch of settlement platform EDXM in Singapore to streamline the settlement of over-the-counter transactions and reduce counterparty risk. Market makers GSR and Virtu Financial were the first firms to use the new platform for trade settlement according to EDX.

Rich Rosenblum, co-founder and president of GSR, said in a statement:  “Being able to mitigate settlement risks for OTC transactions represents a significant advantage for us and our clients, and we are proud to align with a partner that mirrors our dedication to excellence and innovation.”

Nazarali said EDX is excited about launching in Singapore, which is a global financial capital for trading across asset classes, has well defined rules for crypto and a history of thoughtful regulation.

“We are preparing our application to add an exchange in Singapore,” added Nazarali.

Nazarali hopes that the US also introduces crypto-specific regulation in the near future, rather than trying to fit crypto into the framework for traditional finance. For example, in April this year The Monetary Authority of Singapore introduced its payment regulations for digital token providers and published guidelines for digital asset custody. The European Union has approved its  Markets in Crypto Assets Regulation (MiCA).

“The blow up of FTX was a seminal moment and a lot of changes have made the crypto industry better and stronger,”  said Nazarali. “The crypto ecosystem has progressed but there’s still a lot to be done.”

EDX ’s international growth comes after the firm closed its Series B funding round last year co-led by Pantera Capital and Sequoia Capital, a founding consortium member. Other founding members who participated in the funding round include Citadel Securities, Fidelity Digital Assets and Virtu Financial.