Crypto Exchange launches a fully confidential trading platform

The institutional market participant is significantly underserved in crypto markets compared to traditional markets, especially from a market infrastructure perspective, according to David Wells, CEO of Enclave Markets.

“Growing institutional use of crypto as an asset class has led to the opportunity to serve this customer segment with products that have a proven model in traditional markets, such as a cross network, but with infrastructure and settlement improvements offered by distributed technologies,” he said Traders Magazine.

On September 8, Enclave Markets, an institutional-grade digital asset trading platform, announced the launch of Enclave Cross, a new service that allows participants to trade blocks of digital assets at given market price without information leakage or market impact.

Enclave Cross has begun early production testing with select institutional trading firms and prime brokers, including Hidden Road Partners, LedgerPrime, Republic Crypto, Fir Tree Partners, Scrypt, FBG Capital and Blizzard Fund, among others.

Enclave Cross enables approved participants to execute block trades in a completely private and secure manner.

Wells said that similar to the evolution of traditional markets, large buy-side institutions are now seeking marketplaces to be able to move in and out of positions without suffering market inefficiencies such as information leakage, strategy signaling and market manipulation.

“Custodians are seeking solutions to rebalance their large portfolios without paying the high transaction costs of using existing solutions in crypto marketplaces, where liquidity is highly fragmented across various centralized and decentralized trading platforms,” ​​he said.

Enclave Cross leverages a new hardware technology called Secure Enclaves, which cryptographically guarantees the integrity of the codebase that autonomously powers the trading platform, Wells explained.

“This secure enclave relies on a group of trusted third parties to secure the trading platform and approve any changes in a consensus mechanism,” he said.

The end result is that no market participant or platform operator can have preferential access or any kind of informational advantage over any other participant, he added.

“This model guarantees the integrity, privacy and security of the marketplace, all within a compliant liquidity pool,” Wells said.

Today, there are two models of crypto exchanges – centralized exchanges and decentralized markets.

Wells said centralized exchanges are efficient but rely on the exchange operator as a trusted central party not to engage in any practices that would be unfair to users, such as “rehypothecating user assets similar to what we saw earlier this year”.

Decentralized markets solve this problem of single point of failure, but suffer from problems related to non-private order flow, difficult to scale throughput for institutional traders, and some market manipulation practices in the chain such as MEV, which is a form of front runner, he said.

According to Wells, due to the fragmented nature of crypto liquidity, large orders on a single order book tend to move prices in a more amplified manner in crypto.

“Additionally, current crypto trading venues have historically been retail focused, with most of the liquidity being near the top of the order book,” he said.

Wells further said that institutions with large orders require greater depth in the order book which requires work-around solutions such as order routing and execution algorithms such as TWAP or VWAP, but this only partially reduces the market impact and can even be reverse engineered by other trading algos for market participants.

Wells said the main gaps in the crypto market for institutions are related to the lack of protections that guarantee market integrity, privacy and security.

“Additionally, today’s trading venues are retail first, meaning they look more like a retail brokerage compared to what is offered in traditional markets such as more sophisticated marketplaces and price discovery mechanisms such as a Crossing Network or Alternative Trading System,” he said.