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TD Ameritrade is a brokerage firm that offers an online platform for the trading of stocks, futures contracts, exchange-traded funds, and other investments. Now this financial giant, worth a total of $38+ billion, is making headway into the cryptocurrency space which is sure to cause ripples.
Owned by TD bank, its largest shareholder, Ameritrade has some 11 million funded customer accounts and client assets of about $1.118 trillion according to recent estimates. This massive customer base had many wondering: for how long would this major trading firm continue to ignore the emerging cryptocurrency space? Well, in an unexpected move, Ameritrade has decided to back an exchange called ErisX. The move comes with a handful of other financial giants backing the new exchange which was formally announced today in a press statement.
What Is ErisX?
The Ameritrade backing comes at the same time ErosX announced their plans to launch a derivatives exchange and clearing organization. The platform will allow for fully-integrated digital asset futures and spot contracts all on one platform.
The new venture is itself backed by far more than just Ameritrade. The upcoming ErisX platform has found backing from both old and new, traditional and digital, asset markets. Some of these include DRW Venture Capital, Valor Equity Partners, Virtu Financial (VIRT), NEX Opportunities, Cboe Global Markets (CBOE), CTC Group Investments, Digital Currency Group, Nico Trading, Pantera Capital and Third Stone Partners. All of these financial firms possess significant pull in the financial markets, but some are new players who are burgeoning in the crypto space.
The CEO of ErisX is set to be Thomas Chippas, who is the former head of global quantitative execution at at CitiGroup. ErisX has said their goal is to resolve the roadblocks currently present in the market in terms of security and compliance. These are the two main concerns Chippas outlined in his press statement today.
Institutional Involvement at the Macro Level
The backing by Ameritrade for ErisX comes at a time when other Bitcoin swap exchanges are following suit and announcing their plans to open their doors. For example, trueEX LLC, another derivatives exchange, is expected to release their own bitcoin swap service similar to what ErisX is offering.
The current worry among investors is that crypto markets are too volatile. This has caused some regulators to argue that the market is especially prone to manipulation. ErisX has said that its goal, then, is to bring some of these digital assets closer to traditional asset classes. They do this by appealing directly to brokers such as Ameritrade.
Head of futures and foreign exchange trading at Ameritrade, J.B. Mackenzie, said that the reason for Ameritrade’s backing is that: “we wanted to find something that brings cryptocurrency to customers where they can see it on an actual exchange, something they feel comfortable with in regulated space.”
Another financial giant, Virtu Financial Inc., also backed the ErisX platform. Virtu Financial Inc. is one of the largest high-frequency trading firms in the world. Therefore, the breath of diverse financial institutions backing this platform is staggering.
ErisX is aiming to be launched next year with not only direct “spot” trading of digital coins, but also futures contracts. Currently, CME Group Inc., the world’s largest exchange group, has their own bitcoin futures market which they launched in December. However, since then, we have not seen any big-name futures exchanges appearing until recently.
According to representatives of ErisX, they said that now that the backing and funding has been achieved, they can get to the most important next thing: filing their Bitcoin swap plan with the Commodity Futures Trading Commission.
Swaps function much like futures since they allow investors to bet on which direction the price of Bitcoin they believe is heading. However, these are linked to interest rates and ErisX is looking to model their swaps based on the contracts already in use for foreign currency exchanges. Therefore, much of the infrastructure is already there for traditional assets: they just need to be applied to the cryptocurrency space.