BitGo and OTC Markets Group have recently announced a strategic alliance designed to give more than 150 registered broker-dealers a regulated pathway into digital assets through OTC Link ATS. Traders Magazine caught up with Stefan Von Haenisch, Managing Director and Head of BitGo Prime to learn about the rationale behind the partnership, how it could change institutional participation in crypto markets, and why execution quality and settlement efficiency are emerging as key differentiators as traditional financial firms increase their exposure to digital assets.
What gap in the institutional market does the alliance between BitGo and OTC Markets Group address, and why is now the right time for this collaboration?
Under updated SEC Staff Guidance, broker-dealers can hold and transact in crypto for clients. SEC Trading and Markets staff are creating a path for the trading of crypto assets (both securities and non-securities) on SEC-regulated platforms such as alternative trading systems and national securities exchanges. OTC Markets and BitGo agree the regulatory landscape is rapidly evolving, and the time to collaborate is now.Our goal is to establish a gold-standard for reliable, efficient, and compliant markets for broker-dealers and their clients to engage in crypto trading.
How do you expect access to digital assets through OTC Link ATS to change the way broker-dealers engage with the crypto market?
We believe access to digital assets through the OTC Link ATS will enable many broker-dealers to engage with the crypto market for the first time. By combining a streamlined custody and settlement experience with a well recognized trading venue, our collective aim is to enable an experience that makes access to crypto as seamless for broker-dealers and their clients as any traditional asset class.
Your recent execution quality analysis found a significant difference in fee-inclusive execution costs across venues. What are the main factors driving those differences?
Trading at individual exchanges, which were predominantly built to handle retail flow, by definition relies on that one venue to have deep orderbooks. A trading desk like BitGo Prime is connected not to just one, but a multitude of exchanges, liquidity providers and market makers. As a result, our ability to work a trade across all of these venues simultaneously means that our clients would be able to get a better fill.
The report suggests execution cost gaps widened during April’s market volatility. What does that tell us about liquidity and market resilience across digital asset trading venues?
Market making activities in the crypto space are largely unregulated. There are various models that MMs implement when they agree how to provide market making services to new foundations that are looking to TGE. Profit sharing agreements can influence the way market makers provide liquidity. During times of volatility, it may be disadvantageous to a market maker to show pricing for fear of being left ‘holding the bag’ and thus pull liquidity.
As more traditional financial institutions enter digital assets, do you expect execution quality to become as important a differentiator as custody, regulation, and access?
The market makers that guarantee execution quality, not only in terms of pricing and up-time reliability but also with regards to efficient settlement procedures, will be the winners in this game. Offering clients the ability to take risk is one thing, but being that counterparty that actually provides a fast and safe method to then remove the settlement risk, that’s what will be the deciding factor in this race.
Looking ahead, what further improvements are needed in digital asset market infrastructure to support broader institutional participation and trading at scale?
Counterparty risk is at the forefront of every single trade done in the market. BitGo has been a pioneer in addressing this risk. With the continued development of its Go Network, BitGo’s off-chain settlement ledger, any accounts can now settle bilaterally on a DVP basis 24/7, without having to move any digital assets on-chain or relying on wire transfers to take delivery or send out USD.
The image for this article was generated using AI.
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