Stephan Lutz, acting CEO and group CFO of BitMEX's parent company, 100x Group, thinks that crypto exchanges that monetize proprietary trading should have phased out their internal market maker teams by now.
BitMEX CEO Stephan Lutz Says Crypto Exchanges Should Remove Their Market Maker Teams
"There's no need for that anymore," Lutz said in an interview. “You have critical magnitude,” he stated.
“You have enough HFTs (High Frequency Traders) and support units out there to perform this function,” he added, referring to liquidity providers who fill gaps in the market when there are not enough buyers or sellers.
The Financial Times reported earlier this week that the Singapore-based exchange Crypto.com is employing internal dedicated trading and market maker teams that trade tokens for profit, raising concerns about potential conflicts of interest.
Crypto.com told the FT that these teams are treated the same as other third parties and exist on its platform to facilitate tight spreads and efficient markets.
BitMEX, once the world's largest crypto derivatives exchange, also employs investors within its own structure.
They work for a separate legal entity called Arrakis Capital, which is a major domestic market maker for the BitMEX exchange. Today, Arrakis plays a much more limited role, which Lutz describes as a "treasure table."
According to Lutz, this transition is natural for crypto exchanges in a market with more mature companies and more institutional liquidity providers.
“Arrakis basically stopped doing business on a larger scale in 2020,” Lutz said. In BitMEX's heyday, the business and its founders were in much better shape, before being shaken by accusations that they operated an unregistered trading platform brought by the US Department of Justice and the Commodity Futures Trading Commission.
*Not investment advice.