Financial Intermediaries and Their Role in Attracting New Investors to Digital Assets
ErisX recently announced the launch of our spot market, the first part of our vision for a unified digital asset spot and regulated futures exchange.
We have brought together players from the emerging digital asset market with players in the traditional commodity markets including traders, investors, market makers, miners, exchange operators and yes, intermediaries as well. In fact, our vision for a regulated market for digital assets is built on intermediary relationships. Through these relationships, we address gaps in the market that will accelerate adoption and accessibility to a broader array of participants in the coming years.
Regulated financial intermediaries such as futures commission merchants (FCMs), clearing houses and exchanges, as well as non-bank trading and clearing firms, provide a familiar platform. They also provide scalable solutions and minimize risk. It is with this in mind that we have established our strategic partnerships, set our member and account requirements, and built our marketplace. We believe that individuals will benefit from our intermediary relationships. Below we explain our approach and how we believe that intermediaries will help enable further mainstream adoption of digital assets.
A Familiar Platform
With the help of our partners, ErisX will be accessible on familiar platforms that investors already use to trade other asset classes. Intermediaries such as futures commission merchants and broker dealers offer ease of use for investors. These intermediaries are well-known and trusted brands with the ability to change an intimidating landscape into a familiar experience. They can reach investors via media they regularly use and provide effortless access to the digital markets. From account funding and trading to portfolio allocation and post trade transaction processing, retail and institutional clients alike rely upon trusted intermediaries with the necessary capabilities to ensure they can go from trade idea to trade implementation, seamlessly.
We believe investors prefer that their positions in digital assets be established as part of a portfolio diversification plan. The familiar communication, access and service landscape will provide investors with convenience and engender the trust in new digital asset products necessary to invest in them.
Specialized and Scalable Solutions
At ErisX, we are committed to providing an improved experience for the trading of digital assets for institutions and individuals alike. Retail and institutional intermediaries such as FCMs and broker dealers are positioned to provide specialized, tailored services. Traders and investors can leverage intermediaries’ tools for research and education, as well as idea implementation to reach financial goals.
By focusing on intermediaries ErisX can specialize in services and products tailored to the needs of intermediaries, leaving intermediaries to in turn specialize in providing products and services tailored to the needs of their customers, creating a better experience for all.
In fact, the leading retail broker dealer / FCM in the United States has 11 million clients on its books trading a multitude of assets with a variety of trading and investing objectives and timelines. By working with broker dealers and FCMs that can specialize their offerings and address client inquiries that go beyond trading of one asset class on a single market, ErisX and our intermediaries can each focus on what they do best, respectively. Broker dealers and FCMs with an existing customer base can focus on investor products, education and tailored services that will help attract new participants to this market and enable responsible adoption of this new asset class into investor portfolios. ErisX can in turn focus on attracting new broker dealers and FCMs and our aim to operate a safe, reliable, spot and futures exchange and clearing house.
Broker dealers and FCMs are accustomed to a market structure, in most asset classes, that includes a clearinghouse. Clearing services are integral to the safety and soundness of asset markets and for that reason ErisX has decided to offer a clearinghouse in addition to our exchange. We look forward to the nature and process of clearing evolving as new techniques and technologies are developed and refined. We will consider how best to adopt them for our own market, but at the start ErisX’s clearinghouse will offer a style of clearing that is familiar to our own intermediary customers. Following regulatory approval from the CFTC, ErisX will be a licensed derivatives clearing organization for regulated futures products. We will apply the same regulatory standards and principals to the clearing of spot transactions as well.
ErisX’s clearinghouse will be the counterparty to everytrade, acting as the buyer to every seller and the seller for every buyer for every trade. This mitigates the counterparty risk for traders and obviates the need for bilateral credit and risk relationships between counterparties.
We expect that the majority of diversified investors will prefer to integrate their digital asset investments into the broad portfolio of investment management tools and services typically provided by third-party intermediaries. The ErisX market will provide investors the opportunity to work with and benefit from our intermediary relationships. They will engage with a familiar platform, companies they already know and trust, minimize their risk and make use of intermediaries’ specialized solutions. If you don’t meet our minimum requirements for joining the ErisX platform directly, stay tuned for more information about how to leverage our intermediary relationships. As we continue to grow our community and develop our platform, it will be ErisX and our intermediaries that will enable widespread adoption of digital assets from an expanded array of market participants.