Cryptocurrency market maker Cumberland is modernizing the way it handles over-the-counter (OTC) trades with counterparties.
Announced Tuesday, the unit of financial trading giant DRW has unveiled a so-called single-dealer platform called Marea, allowing institutional investors to interact with Cumberland through a screen-based interface, rather than negotiating trades by phone or Skype.
As such, the new portal brings Cumberland in line with the way OTC trading has been conducted on Wall Street for more than a decade in traditional asset classes like stocks.
“This is a single-dealer platform and a way for our counterparties to interact with our markets, execute, trade and also view their trading history via a platform,” Bobby Cho, Cumberland’s global head of trading, told CoinDesk, adding:
“We looked at what other asset classes have done in the past, and that was an evolution from voice to chat to kind of on screens.”
To start, the new OTC platform will handle trading of 10 popular cryptocurrencies and also interacts with back-office reporting, ably handled via a tie-up with trade reporting specialists MG Stover.
The initial 10 market pairs include zcash, stellar lumens and the U.S. dollar-linked stablecoin TrueUSD, and then the plan is to offer the other coins Cumberland trades, said Cho.
“We are hoping to expand that into all the coins that we trade here, so upwards of about 40 coins, and then expand across the different settlement fiat currencies we also settle in – dollars, Swiss francs, euros, GBP and other currencies like that,” he said.
“So it’s a little bit different from exchanges where you are set to what the exchange offers you from just an order book perspective. In the future, we hope this opens up our counterparties to trade any asset that we allow against either any fiat currency or any other crypto that we offer.”
Also to be added to the portal is the research Cumberland began producing in-house last year, Cho said.
Meanwhile, Marea integrates with back-office trade reporting and reconciliation of positions at the end of the day, said Cho, “whether that’s through a spreadsheet that’s downloadable or through the user interface.”
His team wasn’t going to attempt to build a “full-stack solution for front and back office in a silo,” noted Cho.
To help with the process, third party fund administrators were brought on board, such as MG Stover, which currently services over 80 crypto-dedicated hedge funds.
Matt Stover, CEO of MG Stover, said this involves simple concepts like getting a trade confirmation that is time-stamped with the right quantity and making sure funds have proper books and record.
“We take best practices from the private fund administration space and apply these to digital assets,” he said. “We are really trying to institutionalize the digital asset space.”
Bobby Cho image via CoinDesk Consensus archives