BitMEX CEO Suggests Crypto Exchanges Should Eliminate Internal Market Makers – Here's Why
BitMEX CEO Stephan Lutz has stated that crypto exchanges do not need to run internal market makers after it was revealed Crypto.com has internal trading teams that trade crypto.
The revelation raised concerns about a potential conflict of interest at Crypto.com.
In an interview with The Block, Lutz opposed the idea of internal market-making teams.
The CEO said that exchanges that make money from proprietary trading should by now have let go of their internal market-making teams.
A Financial Times report revealed that the Singapore subsidiary of Crypto.com runs an internal proprietary trading and market-making team that trades crypto on behalf of the exchange.
However, Crypto.com justified the team’s actions, saying that they treated it the same way as any other third party. The team exists to facilitate tight spreads and efficient markets on its platform, the exchange added.
A spokesperson from Crypto.com at the time said that the trading team ensures that the exchange remains risk neutral by hedging these positions on a number of venues, including the Crypto.com exchange.
Crypto.com does not rely on such internal trading as a source of revenue, the spokesperson added.
However, Lutz opined that there are enough HFTs (High Frequency Traders) out there and prop shops that can perform the function of proprietary trading and market maker teams.
BitMEX faced similar allegations of running an internal trading team to make profits years ago, however, Lutz clarified that the separate legal entity named Arrakis Capita now serves a very limited role for BitMEX.
Arrakis, which used to serve as an internal market maker for BitMEX, is now “technologically” and “organizationally” separated from the derivatives exchange, according to
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