FalconX, a digital asset prime broker, has partnered with Fusion Digital Assets, TP ICAP’s Financial Conduct Authority (FCA) registered UK-based wholesale spot crypto-asset exchange. Duncan Trenholme, global co-head of digital assets at TP ICAP, spoke to BEST EXECUTION about how bridging ‘traditional’ finance and the world of digital assets can aid the search for liquidity.
The integration with Fusion Digital Assets is intended to provide FalconX access to pricing and liquidity from TP ICAP’s wholesale clients, combining FalconX’s custodial capabilities and TP ICAP’s markets infrastructure and data solutions.
Trenholme told BEST EXECUTION that the speed of settlement native to blockchain instruments is an important factor when it comes to sourcing liquidity.
“Within crypto markets clients are able to trade and settle their positions over short timescales, minutes or hours, rather than over days [as] within traditional markets such as securities or FX. This allows clients to cycle their inventory and collateral multiple times within a trading day.”
He continues, “As such I think that if other asset classes move ‘on-chain’ through the tokenisation process, then clients will be able to trade and settle positions much quicker in these traditional markets. Collateral management is one determining factor in whether clients can make prices, or create liquidity, so it stands to reason that adoption of this technology within traditional markets could lead to greater liquidity in the product.”
Both traditional finance and the crypto market stand to gain from bridging the gap between the two worlds, Trenholme said.
“Traditional wholesale markets exist to enable the flow of capital, resources and energy through the global economy and for participants to manage their risk in these products,” he said. “This partnership speaks to how crypto-assets are becoming a key new resource for the global economy, and particularly the digital economy. Digital assets such as Bitcoin or Ether facilitate access to blockchain enabled services. Examples include cross-border remittance via stablecoins or fund raising via a token issuance. The base asset can pay for transaction fees on this network, in a pay-as-you-go type model.”
As the digital economy grows, demand to transact and manage risk in these resources grows as well, Trenholme believes.
“Initially to speculate on the promise of these networks, but increasingly it’s due to usage of the network and the need to pay for services. For traditional financial firms it’s typically easier for them to connect to this through existing service providers, such as TP ICAP, where they have a lot of existing connectivity, than build new connections to a service provider native to the crypto-asset class,” Trenholme added.
But the size of traditional markets remains orders of magnitude bigger than the crypto-asset market, Trenholme noted, and remains the major connection route to participants of the global economy.
“For companies native to crypto it’s key to business growth to participate at the venues where the two can interact,” Trenholme added.
Austin Reid, global head of revenue and business at FalconX, said: “Collaborating with Fusion Digital Assets is another significant step in our ongoing efforts to bridge traditional financial markets and the growing crypto-asset ecosystem.”
“This will enhance liquidity for our clients and foster an environment that propels growth and innovation in the digital asset industry. It underscores our commitment to providing secure, efficient, and seamless access to the global digital asset market for our clients,” Reid added.
Tom Flanagan, global head of execution and liquidity management at TP ICAP Digital Assets, said: “Bringing a player of FalconX’s pedigree onto Fusion Digital Assets is another step forward in the growth of our exchange. Our aim is to offer clients a unique liquidity experience in a secure environment. FalconX’s integration and support of Fusion Digital Assets advances our aim. We look forward to extending our diversified liquidity to FalconX and their franchise.”
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