The decentralized nature of crypto presents unique challenges to investors of all types, according to Anthony Mazzarese, Co-founder and Chief Commercial Officer, Crossover Markets Group.
For individual retail traders, bundled services—such as execution, liquidity, custody and so on—made the market more accessible and easier to understand, he said.
For institutional clients, it is necessary to seek out best execution, and in most cases, this means being able to trade across multiple exchanges and venues, he added.
By not having fungibility across crypto exchanges since each exchange is also the custodian of funds, trading becomes capital inefficient as it becomes expensive to finance positions in many different locations, Mazzarese stressed.
“This “silo effect” makes true price discovery and best execution difficult to achieve,” Mazzarese told Traders Magazine.
For instance, when opening a position on a given bundled exchange, a client typically must also custody the crypto there and then eventually close that position only on that exchange, he explained.
“This closed-loop system is not how institutions interact in other markets,” he said.
On March 21, Crossover Markets launched a first-of-its-kind execution-only digital asset trading venue CROSSx with seed round financing from Flow Traders, Nomura’s Laser Digital, Two Sigma, Wintermute Ventures, Gate.io and a consortium of retail brokers.
“By decoupling trade execution from custody and brokerage we give institutions the ability to freely choose their own credit counterparties,” Mazzarese commented.
As an execution-only trading venue provider, Crossover does not hold client funds, handle assets or carry counterparty risk.
Crossover’s model leverages best practices and order logic from the equities and FX markets, seeking to deliver “unprecedented efficiencies”, Mazzarese said.
“We fully expect our clients to not only trade with us, but also execute on other venues and exchanges to seek out the best price,” he said.
“We make this easy by not forcing clients into opening and closing their positions with us. We prefer to compete on price, execution quality and technical features rather than holding client assets hostage,” he added.
Crossover was founded by industry veterans from traditional finance.
Anthony Mazzarese and CEO Brandon Mulvihill most recently spearheaded the FX Prime Brokerage business at Jefferies, whereas CTO Vlad Rysin earlier served as CTO of Euronext FX.
“While cryptocurrencies offer the potential for enormous efficiency through 24/7 movement of funds and the ability to self-custody assets, there were some obvious inefficiencies that stood out to us, specifically with respect to institutional clients,” he said.
Mazzarese said that coming from a traditional finance background, the team was fascinated by the growth of digital assets and the potential this new technology could unlock.
He further said that the early adoption and growth of digital assets originated in the retail community, and later expanded into the institutional market.
This “bottom – up” phenomenon is unique, as tradfi products often originate in the institutional market and only later become available to retail consumers, Mazzarese said.
As a result of this novel mode of maturation, many of the offerings targeting institutional clients were, in many respects, slightly more advanced versions of retail products, he said.
These missed the mark for sophisticated users, particularly the underlying basic technology and bundling of services through a single counterparty, he added.
“We were shocked to learn that the separation of execution and brokerage or custody was not at all common in the market and that there was a lack of true “institutional-only” offerings,” Mazzarese said.
Amid these conditions, the decision to launch CROSSx felt obvious, according to Mazzarese: “Our aim is to provide best-in-class execution technology that is counterparty-agnostic, enabling institutional clients to select their own custodians, counterparties, and prime brokers.”
“We believe this is disruptive and will help guide the market toward further institutional adoption,” he added.
With sub-20 microsecond matching engine latency, CROSSx platform is many times faster than typical crypto exchanges, according to Mazzarese.
“We pride ourselves on being the fastest trading venue in the digital asset space—not only in trade execution times, but also quote distribution times, and even during periods of extremely high volatility and throughput,” he pointed out.
“Because we are orders of magnitude faster than our peers, we are able to print quotes and execute trades many times inside of each single quote and single trade on other venues,” he said.
He added this is the blueprint for a market data framework that provides more granularity on market activity, helping to “fill in the gaps.”
Algorithmic traders will generate signals faster on CROSSx, which will lead to better price discovery across the fragmented market, Mazzarese added.
According to Mazzarese, their CTO Vlad Rysin is an exceptional technologist with a 30+ year track record of building ultra-low latency venues in traditional markets.
“Vlad and his team have coded our technology in C++ using modern programming methods, omitting the unnecessary code that adds complexity and latency to the trade lifecycle, and yet is common in legacy systems,” he said.
“This helps CROSSx achieve unparalleled speeds and performance,” he added.
This ultra-low latency matching is even more impressive when considering the complex interaction rules and sophisticated order routing logic taking place inside of each quote and trade execution, Mazzarese said.
To be able to achieve this level of complexity and sophistication within 20 microseconds, with the ability to process millions of messages per second, is “exceptional”, he noted.
“CROSSx is accessible via FIX and we plan to launch a binary protocol which will further reduce execution times,” Mazzarese added.
Mazzarese said the team is optimistic about the future of crypto trading in the institutional space.
“We believe others share our vision that market structure must adapt in order to spur on mass institutional adoption, and we are pleased with the progress that we have seen with some of the leading firms in the market,” he said.
“As an industry, we must work together to build a healthy ecosystem of participants that serves retail clients all the way up to the largest institutions—while mitigating credit risk and providing best execution,” he concluded.
