ErisX is improving the digital asset experience by integrating digital asset products and technology into reliable, regulated and robust capital market workflows. Our innovative platform will uniquely enable trading of both spot and futures on a single infrastructure, creating price transparency and collateral efficiency in ErisX’s fully funded model.
While addressing impediments institutional investors face when approaching the digital asset markets, we recognized a need for institutional-grade data. Earlier, we spoke with Castle Island Ventures’ Matt Walsh about the need for institutional-grade market data and how “this is a critical enabler for institutional adoption of digital assets.”
We agree that market data is one of the keys to digital asset market maturation. In this post we talk about the importance of improved market data, how our market surveillance team leverages quality data to comply with regulatory requirements and how we are laying the groundwork for a sustainable new asset class.
The Need for Quality Market Data
This BitWise report stated that 95% of exchange volume is fake, underscoring the need for improved digital asset market data. Similar to any other traditional commodity, a digital asset market needs quality data, too.
As we set out to create a digital asset market with characteristics similar to those in traditional commodity markets we start with the premise that financial product development relies upon good quality data. For example, the ErisX surveillance program and our internal research is driven by the analysis of reliable, high quality data sets. This helps us implement regulatory programs and develop products that support new levels of digital asset market transparency.
At ErisX we are developing the infrastructure for a sustainable new asset class. As digital assets evolve to become a core component of a diversified investment portfolio, we are focused on providing access to this market in a way which mirrors an investor’s experience with traditional markets. By working with an institutional-grade market data provider such as Inca Digital Securities, we are addressing an impediment that institutional investors have been facing.
“If you have the right data, and systems to analyze that data, you’ve built the foundation for market maturation,” said Adam Zarazinski, Chief Executive Officer of Inca Digital Securities.
No market exists or moves in isolation and it is critical that we understand how different groups and asset classes interact with and influence the digital asset markets. For example, these markets are influenced by developers and miners in this space, the actions taken by regulatory agencies and information relayed via social media. It is important to contextualize market movements and the actions of these agents, and ErisX is working with Inca to view the broader market data holistically.
Market Data for Regulatory Compliance
As a Designated Contract Market (DCM) and Derivatives Clearing Organization (DCO) under the jurisdiction of the Commodity Futures Trading Commission (CFTC), ErisX must comply with dozens of regulatory Core Principles. The CFTC regularly conducts reviews of each DCM’s ongoing compliance with core principles; including Core Principle 4 — Prevention of Market Disruption, which focuses on Monitoring of Trading and a DCM’s market surveillance program.
ErisX’s market surveillance program identifies situations that could pose a threat of manipulation. The Surveillance team monitors trader activity, price relationships and relevant fundamental factors for all active contract markets on a daily basis. Inca’s NTerminal provides ErisX with real-time and historical information, enabling the Exchange to continuously review for potential market problems and anomalies. ErisX sifts through relevant news, market metrics and fundamentals, price and volume spikes and correlations across a large number of market venues, customized alerts and in-depth monitoring of the underlying blockchain health metrics, all customized to enhance our surveillance efforts.
“The volume of data created by the trading and market activities we support means we have a constant need for better investigative tools with which we can perform our market studies and monitoring. With respect to time or quality, without the right tools to sift through this data we would be at a disadvantage,” said Robert Thrash, COO of ErisX. “We monitor our market to see if our pricing and volume is in line with the rest of the market. For example, is our market responding to healthy fundamentals or undue influence?”
ErisX believes that high-quality market data will address impediments institutional investors face in adopting digital assets. Further, market data providers such as Inca Digital Securities (and in conjunction with the Eventus trade surveillance system) enhance ErisX’s market surveillance and trade practice surveillance activities. All of this is in an effort to support our listed markets’ compliance with CFTC Core Principles and enhance the digital asset trading experience for individuals and institutions alike.