The cryptocurrency trading world is expanding, and new companies like Troy Trade are working to extend prime brokerage services to established financial firms, as well as crypto-trading operations that need a tier 1 liquidity provider that operates in numerous crypto liquidity pools.
Troy Trade is focused on professionals. Instead of operating a crypto exchange, the company is purpose-built for professional traders, and large money managers. If you are wondering if a prime brokerage is the next logical step for your crypto-focused trading operation, Troy Trade could be worth learning more about.
There are a lot of crypto exchanges out there, but few of them offer the kind of services that a prime brokerage can deliver. If you are thinking about the kind of leverage that is available from some of the existing trading platforms, it is important to understand the way that exposure is being structured, and how the chain-of-ownership is designed.
Troy Trade may be the first true crypto prime brokerage in the world, and it certainly has a good idea when it comes to bringing the same level of service that a company like Goldman Sachs offers to hedge funds, to the world of cryptos.
How is a Prime Broker Different from an Exchange?
You might be wondering…how is a prime brokerage different from an exchange?
Well, the differences between the two are vast. A centralized exchange takes your tokens and offers you the ability to trade based on that deposit. A prime brokerage may or may not act as custodian of its clients’ funds, and will be able to guarantee its clients that they know who is the custodian of their digital assets.
Most people don’t think much about counterparty risk. Decentralized digital assets like Bitcoin were created to remove the need for banks from the financial equation, but centralized crypto exchanges tend to offer much higher liquidity (and thus lower prices) for tokens.
One of the problems for larger financial institutions in the crypto world is custody, as a centralized exchange becomes their counterparty. When they deposit their tokens with a centralized crypto exchange, that debt is only valuable as the financial position of the exchange.
Troy Trade is Well Funded and Ready to Go
In addition to a world-class team behind it, Troy Trade just completed a $10 million USD fundraising which saw investments by BlockVC, NGC Ventures, Consensus Labs, Bixin Invest. It also has developed an infrastructure that is perfect for any large trading operation, that needs to manage exposure to assets, and counterparties.
According to Troy Trade, it offers its clients the following advantages (information reproduced directly from company):
- Master-level trading platform
One account with single interface enables full access to the aggregated liquidity of all crypto exchanges. Some key functions include smart order routing, flexible account management, settlement service and automatic risk control.
- Sophisticated Data Analytics Empower customer’s decision making with a sophisticated framework of data matrix including blockchain data, trading data, market data, social data and media data optimized by AI and quantitative models.
- Diversified Brokerage Service Competitive fee rate and superior order execution speed. Real-time fund transfer and settlement service. Provide margin trading and OTC services with advanced convenience.
- Full Stack Quantitative Solutions Infrastructure powered by co-location service to better the performance of high-frequency trading algorithms. Offer best-in-class exposures to quantitative solutions with straight through processing, precise tick historical data and strategy assessment systems.
Troy Trade isn’t the idea of a great cryptocurrency prime broker, it is ready to help professional crypto trading operations to grow with great service and better access to the best liquidity in the marketplace. Existing financial institutions should be able to benefit from a structure they already understand and need for compliance.
Let’s Talk About Leverage
There are cryptocurrency exchanges that do offer a high amount of leverage, but professional traders don’t tend to use leverage from a CFD exchange in the same way that retail traders do. A prime broker is a key part of how professionals structure leverage and Troy Trade is in a good position to help larger trading operations to use leverage in the crypto markets.
Let’s start with a Contract for Difference (CFD) which is the kind of leveraged instrument that most retail traders are going to be familiar with. Crypto CFDs are the most common form of leveraged contract that will give a trader exposure to tokens, but they also create a counterparty risk problem for an institution that has custodial risk parameters.
When a retail trader thinks about risk, they generally apply that risk equation to the trade, and not the exchange (counterparty) they are trading with. A prime broker can structure leverage with borrowed funds, that are used to buy assets outright, instead of using a CFD exchange as a counterparty.
The net result for the trader is the same in terms of exposure, but the counterparty risk is eliminated, as the digital assets can be purchased, and kept in cold storage for the duration of the trade. It might seem like it would be slower to sell the cryptos quickly, but again, this can be resolved via the use of crypto futures that can be covered by the cryptos that were bought on a cash-basis.
Why Does Custody Matter, Again?
Anyone who understands how the financial markets work will immediately know why counterparty risk is one of the most important things for any institution. There have been a few crypto exchange failures over the last few years, but Mt. Gox is one of the most infamous.
Traders who had their tokens on deposit with Mt. Gox are still waiting to reclaim the cryptos, and in the meantime, they are sitting on drives that are being held by the Japanese legal system. Because there is no developed legal framework for the bankruptcy of a crypto exchange, it could take many more years before anyone gets their Bitcoins back.
This situation is totally unacceptable for an institutional investor, and there are safeguards in place to prevent it from ever occurring in the established financial markets. Any prime broker will be familiar with these procedures and have counterparty risk at the center of their business model.
Meet the Team at Troy Trade
A prime broker is only as good as the people who are making it work from day-to-day, and the team at Troy Trade has extensive experience in the financial markets. With all the trading options out there, it is important to know who will be working to ensure that trades are executed at the best prices, and capital is kept safe via effective counterparty risk analysis.
According to Troy Trade, these are the people that created, and make it run:
- Kira Sun, Co-Founder of Troy Bachelor of Finance at Peking University and Tsinghua-MIT Global MBA. Prior to BlockVC, Kira was a trust fund manager of CITIC Trust and expertise in REITS/ABS/PPP and alternative asset management. Kira has rich experience in designing crypto asset management products as BVC16 Index fund, Pure Alpha Fund etc.
- Qihan Lin, Co-Founder of Troy, Chief Product Officer Graduated from Shanghai Jiaotong University and majored in Calculating Mathematics, Qihan is an expert in derivative trading and pricing. Qihan worked as product manager at Eastmoney, Tiger Brokers and OKEx, he has a rich experience in stock broker and crypto trading, especially familiar with margin risk management and clearance. Qihan served as a key member in future derivative trading project in Tiger Brokers, and also designed the OK06 index and relative ETF in OKEx.
- Clark Tong, Co-Founder of Troy, Chief Technology Officer Master in Beijing Institute of Technology，experienced in finance, trading, e-commerce, blockchain and other industries. Successively worked in General Manager of R&D, Haiyin Group, Technical Director of China Building Materials Group, which is Top 500, etc. A team of more than 200 people has been managed. The transaction value of trading system exceeds $15 billion, the total amount of funds managed by the Group is nearly $50 billion.
The Crypto Markets Need Solid Prime Brokers
Having quality prime brokers in a new market is about a lot more than just new options for professional traders. Access to advanced brokerage services can help attract larger, more liquid, financial institutions to a market, which is great for the crypto space.
A market lives and dies on liquidity, and prime brokers are the nerve center of that liquidity in established markets. The same thing could become the case in the crypto sphere, and Troy Trade is working to become one of the first prime brokers in the crypto space.
In addition to a solid platform, Troy Trade also created the Troy Token (TROY), which can be used for numerous things on the Troy Network. If your trading business needs the services of a prime broker, Troy Trade may be worth a deeper dig.
The team at the company will be able to give clients access to know-how that normal retail accounts at other exchanges can’t touch, which is vital to a professional trading operation.