With Ven Trading Launched, LMAX Exchange Explores Bitcoins

In January, LMAX Exchange, an operator of a multilateral trading facility (MTF) of foreign exchange (FX) and CFD assets, announced that it was launching trading in ven currency. At the time it was a bit of a surprise given ven’s small overall currency supply compared to other digital currencies such as bitcoin and litecoin. But, as a centrally backed currency, in many ways it made sense that LMAX chose to dip their toes digital currencies with ven, which shares features with the exchange’s existing list of tradable products.

For LMAX, the company is a bit of a hybrid in the FX market, as it operates an exchange-like platform, matching buyers and sellers. While such an exchange system exists for assets such as stocks, bonds, and futures, the FX world is primarily an over the counter (OTC) market with customers dealing directly with banks and brokers for their pricing. Due in part to foreign exchange trading being highly fragmented and without uniform pricing to all participants, LMAX has been able to create a growing niche of demand for its transparent and central order book system.

Having launched ven, and also being known as taking a non-traditional approach to FX trading, it led to speculation as to when LMAX would enter the bitcoin market and begin to list the product on their exchange. Providing an update on his company’s opinion, in a video blog posted titled “Digital Currencies are Here to Stay”, LMAX Exchange COO, Scott Moffat spoke about bitcoins.

Moffat stated that LMAX is in fact investigating bitcoins and are speaking to players in the field such as wallet companies, retail traders and Liquidity Liquidity The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent Read this Term providers. In terms of the latter, Moffat explained that several firms were interested in understanding how they could make a market in bitcoins and that LMAX had a few Liquidity Providers Liquidity Providers A liquidity provider (LP) constitutes either individual and/or institution that functions as a market maker in a given asset class. Broadly speaking, liquidity providers will act as the both the buyer and seller of a particular asset, thus making a market. In the equities space, many stock exchanges rely on liquidity providers who make the commitment to provide liquidity in a given equity. These liquidity providers commit to providing liquidity in the hopes that they will be able to make a profi A liquidity provider (LP) constitutes either individual and/or institution that functions as a market maker in a given asset class. Broadly speaking, liquidity providers will act as the both the buyer and seller of a particular asset, thus making a market. In the equities space, many stock exchanges rely on liquidity providers who make the commitment to provide liquidity in a given equity. These liquidity providers commit to providing liquidity in the hopes that they will be able to make a profi Read this Term testing such trading in the exchange’s demo environment.

To launch bitcoin trading, Moffat specified four items that needed to be concluded; trading integration, bitcoin storage, clearing, and regulations. Of the first two, Moffat believed they could be accomplished now as LMAX’s trading engine can currently handle 15,000 transactions a second. Also, in terms of storage, Moffat mentioned solutions existed for them to store customer bitcoins, and offered UK based Elliptic, and their Lloyd’s of London insured offering as an example.

Where Moffat didn’t have a clear solution was with clearing and regulation. As a central venue for matching buyers and sellers, LMAX partners with banks who clear trades and are custodians for clients deposits. Without banks involved with bitcoins, it would mean LMAX would require to setup a unique solution to handle clearing of the digital currency. Moffat added that unlike other products they list where clients are primarily interested in trading them, there is more demand for actual exchange of bitcoins, where customers will deposit in fiat and withdraw bitcoins and vice versa.

In terms of regulation, Moffat believed that for bitcoins to become mainstream it would need to shed its anonymity. The view is a popular one among financial executives, and for LMAX, it would mean that they could only launch bitcoin trading once their regulators would be comfortable with it.

Summarizing, Moffat concluded by saying that “We believe digital currencies are here to stay – we are looking at bitcoin, and would like to list bitcoin, and once we ticked those last two boxes (clearing and regulation) maybe we will see bitcoin and LMAX someday soon”