Sources Claims that Crypto Exchange Crypto.com Is Operating Internal Proprietary Trading Desks
As per the latest report from Financial Times, popular crypto exchange Crypto.com has been operating proprietary trading desks internally.
Source familiar with the matter told Financial Times, that Crypto.com has deployed internal teams to trade tokens for profit. The also said that the Singapore-based exchange operates proprietary trading as well as market making teams.
Typically, in various markets, exchanges facilitate transactions between buyers and sellers by matching them at the best available price. Market making and proprietary trading activities are usually carried out by different private companies. Regulators in the United States have started taking action against similar practices observed in other digital asset exchanges.
Recently, the US Securities and Exchange Commission (SEC) slapped a lawsuit on crypto exchange Binance for using a trading firm owned by CEO Changpeng Zhao to engage in “manipulative trading that artificially inflated the platform’s trading volume”.
SEC Chair Gary Gensler said: “These trading platforms, they call themselves exchanges, are commingling a number of functions. In traditional finance, we don’t see the New York Stock Exchange also operating a hedge fund, making markets.”
Sources familiar with the matter also stated that the teams at the internal trading desks of Crypto.com have been asked to “say there is no internal market maker type operation”.
The sources also added that the market making desks at the exchange tries to boost liquidity on the venue. “All companies operating in the trading industry compare volumes to their competitors,” Crypto.com said, while adding that the priority was to “continuously improve order book liquidity and lowering spreads as it results in a more efficient market for all participants”.
Commenting on the allegations, Crypto.com said that they do not engage in any unfair practices. “We have an internal market maker that operates on the Crypto.com exchange and that internal market maker is treated exactly the same as third-party market makers that identically facilitate tight spreads and efficient markets on our platform. This is not a controversial practice,” said the exchange.
It also added that most of its revenue comes from its app for retail traders wherein Crypto.com served as the customers’ counter party for transactions and which it ran as a broker model. “As such, the Crypto.com trading team ensures that Crypto.com is risk neutral by hedging these positions on a number of venues, including the Crypto.com exchange,” the company added.
Commenting on the allegations of its market making desk in order to boost liquidity, Crypto.com noted that “participants on the platform, including market makers, are treated equally,” and that the company “does not rely on proprietary trading as a source of revenue”.