The backers of EDX Markets, a crypto exchange domiciled in New Jersey, have raised capital to support its expansion to Asia.
“Our backers have said they’ll support us with liquidity,” said Kai Kono, CEO of EDXM Global, the Singapore-based entity. “This exchange was started because they wanted a better venue to trade.”
Those supporters are heavy hitters: Citadel Securities, Fidelity Digital Assets, Charles Schwab, Virtu Financial and venture-capital firm Sequoia.
EDX Markets raised a Series B financing in January to support the expansion, which was led by Sequoia and Pantera Capital. The amount raised was not disclosed.
In perpetuity
EDXM Global is focused on the trading of perpetual futures contracts, which its US parent doesn’t list.
‘Perps’ were invented by Hong Kong-based BitMEX in 2016 and have no counterpart in traditional finance. As with conventional futures, these represent standardized contracts traded on an exchange, but they don’t have an expiration date, which makes them useful for leveraged trades. Today perps attract some $75 billion to $100 billion in daily turnover.
EDXM Global will begin trading in early 2025 with four contracts, XBT (bitcoin) and ETH paired with stablecoins USDC and USDT. The contracts are priced in USDC and USDT, although both stablecoins are pegged to the US dollar.
Kono says the exchange will add up to 30 or 40 more digital-asset pairs. One of the reasons to launch an exchange outside of the US is to include assets that the US Securities and Exchange Commission deems securities, but which are not so defined under Singapore law.
Regional landscape
EDX decided to open doors in Singapore because it felt the country’s regulations were best for crypto derivatives. “A lot of crypto-native firms have their headquarters here,” Kono said. He added that Singapore offers a deep pool of talent, along with regulations that he describes as friendly but strict.
The region already has several exchanges specializing in perps: BitMEX, as well as two venues in Singapore, APEX (Asia Pacific Exchange) and AsiaNext, a joint venture between Switzerland’s SIX Group and Japan’s SBI Digital.
Other crypto exchanges such as Binance also offer perps as part of a broader derivatives platform, as do decentralized exchanges for the DeFi space such as dydx and GMX.
Kono says EDXM Global’s offer is different because the exchange is designed to separate custody, whereas other crypto exchanges do this in-house. This creates a conflict of interest, whereby client assets are at risk of being intermingled with those of the exchange (as happened with FTX and other centralized crypto exchanges).
TradFi-ish
Backers such as Citadel wanted to be able to trade crypto without worrying about such conflicts. The traditional model of stock exchanges had long since evolved to require third-party clearing.
EDXM Global will only cater to institutional participants, although this may include wealth-management intermediaries handling retail money on an omnibus basis.
“We’re a bankruptcy-remote platform that can serve a set of institutions that haven’t been able to trade crypto because of concerns about how exchanges are designed,” Kono said.
EDXM Global will also mimic equities exchanges by enabling co-location, by which brokers with seats on the exchange can pay to have their servers located besides that of the venue, for ultra-low latency. EDXM Global’s actual trading takes place in the Equinix TY3 data center near Tokyo.
For the short term, however, EDXM Global will have to provide custody through its US entity, as the Singapore business is still waiting for licensing approval from the Monetary Authority of Singapore. In the US, Anchorage Digital is the firm’s appointed third-party custodian, and the Singapore entity is in the process of applying to outsource custody to Anchorage there.
Kono says the business may later consider going multi-custodian, so users can choose their own.
EDXM Global has already set up a clearing house in Singapore, although it is still awaiting MAS licensing to operate a spot market. The clearing and matching engines are operated in-house, while the venue is outsourcing functions such as KYC, onboarding, transaction monitoring, and on-chain analytics.
Off the ground
Kono’s immediate priority is to attract liquidity, by offering incentives for ‘makers’ and ‘takers’ – users that provide and consume the liquidity available on the exchange. This is where the backing of its strategic investors will be critical. Looking into next year, Kono says he hopes EDXM Global becomes a venue for various institutions to trade perps that are embedded in structured products.
He says his key milestone is to have built the same scale, in terms of daily average volumes, as its major competitors in the perps space by the end of 2025.
As of October 3, BitMEX was trading $439 million in perpetual contracts daily, of which 72 percent was in XBT/USD contracts.
