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THE Infrastructure Project: Trading Technologies and Coinbase’s GDAX Partner On Deal To Connect Cryptocurrencies To Institutions

Cryptocurrency trading moved further into the mainstream today with the announcement that Trading Technologies and the Global Digital Asset Exchange (GDAX), one of the largest cryptocurrency exchanges, have partnered to offer the cash products on TT’s platform.

This deal is potentially huge in the development for the newest asset class, cryptocurrencies, as it represents another major player in the derivatives space expanding the infrastructure for it. TT and GDAX, owned by Coinbase, will be offered to customers beginning in March.

With 19 of the top 20 futures commission merchants connected to TT, this will enable customers who already trade cryptocurrencies on GDAX to do so from the TT trading platform. It also helps build distribution channels to the institutional players in the market such as Tier One banks, brokers and buy-side players. Yes, they have access to GDAX now, but this certainly opens the door to new participants looking for a more conventional and robust way to access these markets from one trading screen and network.

Secondly, it further complements the futures markets on Cboe Futures and CME, which each launched bitcoin futures in December. Ultimately, this means bitcoin and other cryptocurrencies have gone institutional.

Adam White, general manager of GDAX, said the tide changed dramatically in 2017 from a retail traded product to one that is substantially used by institutional participants with much room to grow. TT believes early institutional adopters of cryptocurrency markets include some proprietary trading firms, hedge funds, buy-side firms and others. But there is room for expansion from there. Michael Kraines, TT’s chief commercial officer, said the plan now is to take this offering to its current client base, as well as other institutional players.

GDAX was launched in 2015 by San Francisco-based Coinbase, which now serves more than 13 million customers. If just a fraction of those customers come on board with TT, it will be a win-win for both firms. From TT’s perspective, this could be a game changing move for the company over time.

For all the buzz that has been generated by the cryptocurrency space, especially with the Cboe and CME bitcoin futures contracts, it has not been met with massive volume spikes. GDAX boasts about $1 billion of trading on its cash market daily. But the costs of trading the futures product has dampened the value proposition for many. Some firms simply cannot get their clearing member bank to clear the product at all. These are issues that will be worked out over time, or could handcuff its growth in the coming years. From a currency trading perspective, GDAX is already planning to offer fiat currencies on its platform as well, enhancing new trading opportunities.

In the meantime, this deal will likely be followed by other cash markets and independent software vendors. The infrastructure to these markets is getting built and this is a major step.



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Kharouf is a Chicago-based freelance reporter and editor who was previously CEO and editor-in-chief of John Lothian News.