Although the world’s second-largest exchange is still unable to secure the CFTC approval to list bitcoin derivatives contracts, it has been quietly powering crypto markets in a way that lends more credence to that notion.
Nasdaq Inc’s SMARTS trade surveillance technology, which monitors real-time trading activity and raises alerts with the exchange if it discovers unusual trading activity, is now employed by seven cryptocurrency exchanges.
A Forbes report indicates Nasdaq Inc has a team of about 20 legal and technical experts who apply certain due-diligence criteria to evaluate whether the applicant exchange is technically capable and “morally inclined to use the software wisely.”
Gemini and SBI Virtual Currencies are the two exchanges confirmed to contract Nasdaq in order to utilize SMARTS technology, but the New York-based exchange operator is yet to confirm who the other five customers are.
Tony Sio, Nasdaq’s head of exchange and regulator surveillance, said that any cryptocurrency exchange wants to get the technology must answer “Key Questions to Ask When Evaluating a Cryptocurrency Exchange.” One question in the ‘Business Model’ is “How reputable are the products available to trade on the venue?”
KVB PRIME: Gateway to the World's MarketsGo to article >>
“Historically, we don’t do such a large vetting process for our clients because they are much more well-known. But as we started working with less well-known names, startups, then we realized we needed to do this check process,” said Sio.
Wall Street Warms to Crypto
More crypto startups want to hire Nasdaq’s SMARTS, an industry benchmark technology used across Wall Street, not only to add more security and identify criminal trading behavior in its venue but also as a proactive approach amid regulatory clampdowns looming now and then.
While Nasdaq is supplying its technology to cryptocurrency exchanges, the company itself consider becoming a crypto exchange over time.
Nasdaq is looking to offer a future contract that is different from what Cboe and CME Group are offering now. One way Nasdaq seeks to differentiate itself and pit against the two bigger competitors seems to be in the amount of data it uses for pricing the digital currency contracts.
Nasdaq, which is a comparatively small player in the futures market, would base its price off of 50 bitcoin sources from around the world, while CBOE is currently using one and the CME is using four.
Also earlier last year, Nasdaq hosted a meeting in Chicago where about half a dozen cryptocurrency and mainstream companies discussed ‘how to encourage the cryptocurrency industry to do [a] thing that will improve its image and validate its potential role in global markets.’