Arbitrage Anyone? BTX Trader Brings Multi-Bitcoin Exchange Trading on One Interface

Late last week, WPCS International announced via a press release that its subsidiary BTX Trader was releasing  its bitcoin trading

Late last week, WPCS International announced via a press release that its subsidiary BTX Trader was releasing  its bitcoin trading platform to public beta.  Headed by CEO Ilya Subkhankulov and CTO Divya Thakur, BTX Trader was purchased by WPCS earlier in the year.  WPCS itself is a Nasdaq listed technology infrastructure penny stock whose market cap soared over 60% on the news to nearly $4 million. The stock move was reminiscent of trading in the late 90’s as many small sized non-tech stocks saw their shares soar on announcements that they had invested in or acquired internet companies.

How’s the platform?

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Regardless of the stock news, which put WPCS on the list of active stocks last Friday, the important question is whether BTX Trader is any good, and if we should care about it?  The short answer is yes.

What BTX Trader is, is a multi-bitcoin exchange trading platform that connects via API to MtGox, BTC-e, Bitstamp, BTC China, Virtex and CampBX. Using the platform, traders can monitor positions, enter orders, and view real time pricing and charts from multiple exchanges on one interface.  As a result, for traders using multiple exchanges, BTX Trader provides a simple solution to handle those accounts on one aggregated platform.

In terms of functionality, charts are offered similar to standard financial trading platforms as tick, one, five, fifteen, thirty minute, hourly, and daily periods are available.  Not available though are technical indicators.

Currently, BTX Trader is being made available for free.  I assume this could change if the product gains traction as they may adopt a monthly charge for using the platform to connect to multiple accounts.  Another possibility is that as a gateway for connecting to existing bitcoin, they would be natural affiliate partners to exchanges.  They may also develop their own exchange as they leverage their client base.

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Trading Opportunities

So what do you really need a multi-exchange single interface for? Firstly, the aggregated feeds provide a simple way of monitoring multiple accounts on one platform.

The real potential comes in latency based trading.  Speaking to dealers online at online forex trading firms about offering bitcoin as a CFD, one of the major concerns is in terms of hedging risk.  While this could be done by buying and selling bitcoins with existing exchanges, there is still the risk of latency arbitrage (more on bitcoin CFDs).

Unlike traditional arbitrage which is based on buying on one exchange at a low price and selling it simultaneously on another for a higher price, latency arbitrage traders execute their orders in the same venue.  What they look for are situations where price movements are lagging those of others.  For example, if a trader sees a currency react to news and move higher on four exchanges but remains stable at a fifth location, more often than not, prices will also advance at that fifth exchange.  Such lags of moves may be the result of technical failure producing latency, or simply a large seller at that fifth exchange.  Either way, traders can take advantage for a quick profit. Within the online forex trading market, latency  arbitrage is one of the most profitable types of trades, but is also viewed negatively  by market maker brokers.  The main reason for this is that market makers take the other side of the trade of their clients; thus effectively losing money each time successful latency arbitrage takes place.

Returning to bitcoins, a platform like BTX Trader can provide the same latency arbitrage opportunity as it can be used to simultaneously monitor tick by tick moves on multiple exchanges.  As opposed to online forex brokers, exchanges provide a venue for matching buyers and sellers but aren’t actively making markets themselves.  As such, latency arbitrage profits are less of a factor to exchanges.  Conversely, frequent traders provide exchanges with increased commission revenues and may therefore not only be seen as potential negative clients but would be welcomed.

Overall, while traders have been building their own private interfaces to aggregate accounts, with BTX Trader’s launch, it brings such a multi-exchange trading opportunity to the masses.

 

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