Citadel Securities‘ main claim to fame in cryptocurrency trading has been as the co-founder of EDX Markets, an institutional crypto trading venue that until recently only supported Bitcoin, Ether and Litecoin. Yesterday Bloomberg reported that Citadel Securities wants to become a market maker for retail crypto exchanges such as Coinbase, Binance and Crypto.com. The report was from unnamed sources.
Initially market making teams would be outside the United States, which might change depending on how regulations evolve in the U.S.
While it may have steered clear of market making for retail exchanges, we believe Citadel may already have some offshore activities. In 2022 it sued a former employee involved in its crypto activities. Court documents mentioned the first systematic crypto trade happening in Asia in March of that year. That was the same year that the Terra stablecoin collapsed, with the blockchain’s founder alleging in court that Citadel Securities may have triggered the fall.
The company’s interest in retail crypto trading is unsurprising. EDX Markets’ volumes for the whole of 2024 were $36 billion. That’s equivalent to a single day’s spot volume on the Binance exchange, with the exchange’s derivatives coming in at three times that level.
Meanwhile, one of Citadel’s best known partners is Robinhood where it pays the company for order flow accounting for 12% of its transaction revenues in 2024.
Payment for order flow is a significant revenue earner for all retail brokers. For example, in the first nine months of 2024, Charles Schwab earned more than $1 billion for order flow, with almost 70% coming from options and the balance from equities.
Given the volumes, it wouldn’t be surprising if Citadel targeted both spot and derivatives for crypto. EDX Markets was already planning to launch offshore perpetual futures.
EDX Markets expands supported crypto assets
Citadel Securities co-founded EDX Markets in 2022 with Charles Schwab, Citadel Securities, Fidelity Digital Assets, Paradigm, Sequoia Capital and Virtu Financial.
Until recently it supported just three cryptocurrencies – Bitcoin, Ether and Litecoin. These are the only three that would have been considered commodities by the SEC under previous Chair Gary Gensler. Spot commodity trading doesn’t currently require a CFTC registration. Subsequently, EDX added the memecoins DOGE and SHIB.
With the SEC withdrawing from various investigations, including into Robinhood, EDX Markets has expanded its coin range by adding another ten tokens. They include three layer one tokens (Bitcoin Cash, Solana and XRP), two more memecoins, the USDC stablecoin, and some of the largest DeFi protocols (Aave, Compound, Chainlink, Uniswap).
