Crypto OTC desks’ trading volume outperforming LMAX and ErisX by 1800% ADV, report finds

Rick Steves

This report becomes increasingly valuable considering the post-FTX landscape and regulatory challenges facing many centralized exchanges (CEXs), leading traders and institutions towards OTC markets for a more stable and secure structure.

The Crypto OTC grass seems to be increasingly greener, according to a newly released report that found that the OTC market size now averages a substantial $1.44 billion in daily trading volume, and 80% of OTC desks experienced an increase in their client numbers in 2023.

The “Crypto OTC Markets: Primer & Insights” report by CCData, created in partnership with Finery Markets, offers essential insights into the Over-The-Counter (OTC) crypto markets, particularly relevant for 2023’s challenging industry climate.

Key highlights from the report include:

OTC Crypto Desks Outperforming Certain Institutional Exchanges in 2023: The report reveals that OTC crypto desks have seen a significant increase in trading volume, averaging about 1800% more daily volume than selected centralized exchanges like LMAX and ErisX. While these centralized exchanges reported an average daily spot trading volume of around $75 million, the OTC market size averages a substantial $1.44 billion in daily trading volume.

Comparison with Centralized Exchanges (CEXs): Despite the high volume in OTC markets, the average daily spot volume for CEXs is recorded at a much higher $23.4 billion per day. This indicates that while CEXs still dominate spot volumes, primarily due to their accessibility to retail traders, there is significant potential for OTC providers as the market matures and gains regulatory clarity.

Growth in Client Base for Crypto OTC Desks: The report shows that 80% of the surveyed OTC crypto desks have experienced an increase in their client numbers in 2023 compared to the previous year. This growth suggests a rising interest and engagement in the OTC market. However, 13.33% of the organizations reported stable client numbers, while a small fraction (6.67%) saw a decline.

Resilience of OTC Markets During the Silicon Valley Bank Crisis: The OTC markets demonstrated resilience during the volatility caused by the Silicon Valley Bank crisis in March 2023. OTC markets maintained consistent spreads, while CEXs experienced significant spread variability. This suggests that OTC markets can offer a more stable and reliable environment for trade execution during periods of high market volatility.

Tighter Spreads in OTC Markets: The report highlights that OTC markets featured significantly tighter spreads during high volatility periods, with minor differences in standard deviations across different trade sizes. This is contrasted with notable spread variabilities in major exchanges like Binance, Poloniex, and Binance US.

The findings of the report are particularly relevant for executives in the trading industry, as they underscore the evolving dynamics of the crypto market, the growing significance of OTC trading, and the need for adapting strategies in response to market changes and regulatory developments.

The report was commissioned by Finery Markets, an OTC trading solutions provider, connecting businesses with best-in-class liquidity providers through a proprietary matching engine.

Finery Markets offering solutions for Crypto OTC desks

Founded in 2019 by chief executive Konstantin Shulga and head of product Ilia Drozdov, Finery Markets has grown a significant presence in the OTC space with its flagship product, FM Marketplace.

Earlier this year, Finery Markets launched a gateway to OTC trading infrastructure designed to be a comprehensive solution that enables market players to launch a fully electronic OTC trading business and manage client relations throughout the entire trade cycle.

Going by the name of FM Liquidity Match, the platform comes with a proprietary matching engine and operates through a sub-account model, allowing for easy customization and management of risk limits, positions, and trading history.

The product, which caters to institutions and crypto businesses, is said to be the first-ever electronic OTC-as-a-service that allows users to access liquidity for digital assets in an electronic and automated way.

Under the hood, FM Liquidity Match utilizes a sub-account model to provide a unique OTC trading experience for digital asset providers. Specifically, a master account is created by each broker, prime broker, OTC desk, or liquidity provider, which then opens multiple sub-accounts to serve the different segments of its client base via GUI or API.

In an exclusive interview conducted at the iFX EXPO 2023’s FinTech Unplugged after-party, FinanceFeeds had the privilege of sitting down with Konstantin Shulga, the visionary co-founder and CEO of Finery Markets. The conversation touched upon a range of critical topics in the rapidly evolving world of cryptocurrency trading and regulation.

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