Today Zurich-based RULEMATCH launched its crypto trading venue targeting banks and securities firms. Seven institutions are using the platform at launch including BBVA, DLT Finance and one of the Swiss cantonal banks. Initially it supports trading of Bitcoin and ETH against dollars.
RULEMATCH purely provides the venue and is not a principal in any transactions. One of its backers, Flow Traders, is amongst the market makers on the platform as is Bankhaus Scheich.
“By being there as day one market maker, we can provide the institutional grade liquidity desired by financial institutions to support the adoption of digital assets and contribute to improving the broader financial ecosystem,” said Michael Lie, Flow Traders Global Head of Digital Assets.
RULEMATCH operates in a manner that traditional financial (TradFi) institutions are more accustomed to. For example, it provides multilateral net settlement. That happens on a T+1 delivery versus payment basis using bank cash rather than stablecoins.
Nasdaq provides the trading technology, Luzerner Kantonalbank handles the cash and for custody, it uses segregated wallets on Metaco’s Harmonize.
“Despite often going unnoticed, a growing number of banks and financial institutions have actually been quite active in the crypto market,” said RULEMATCH CEO David Riegelnig.
“But, as we all know, they have faced challenges due to the many fundamental deficiencies in existing market infrastructure – capital efficiency, counterparty risk, compliance and latency. On RULEMATCH, these banks and their institutional clients are now expanding their activities and deploying many of the same strategies that they have used in traditional markets.”
That said, banks like to participate where possible in regulated venues. In Switzerland, RULEMATCH may not require a trading license because it only provides a venue for cryptocurrencies, not securities.
Regarding an AML license it isn’t registered with a self regulatory organization (SRO) but doesn’t need to because it only deals with institutions. Also, while client wallets are segregated, RULEMATCH is effectively the custodian. Again, in Switzerland it may not need a license, but from a bank due diligence perspective there is limited regulatory oversight. So it’s not entirely risk free. In the United States, institutional crypto trading venue EDX Markets provides third party digital asset custody.
Update: clarified that RULEMATCH doesn’t need to register with an SRO because its clients are institutions.
