According to Bloomberg, the cryptocurrency exchange platform EDX Markets, supported by Citadel Securities and Fidelity Digital Assets, plans to establish an exchange in Singapore after securing additional funding from investors, offering spot and perpetual futures trading services.
EDX CEO Jamil Nazarali stated that the company has completed its second round of financing led by new investor Pantera Capital and existing supporter Sequoia Capital. The new funds will be used to develop new technology and expand EDX’s business in overseas markets, with the specific size of the Series B financing undisclosed.
EDX is seeking approval from the Monetary Authority of Singapore (MAS) to operate the exchange in Singapore. Nazarali mentioned in an interview that EDX operates as a “non-custodial” exchange, not providing cryptocurrency custody services but offering institutional investors a platform to directly trade Bitcoin, Ether, and Litecoin to hedge exposure in ETF products.
To attract institutional investors, EDX has established its own clearinghouse and outsourced the role of custodian to avoid the possibility of commingling funds. The company has chosen Anchorage Digital as a custodial service partner. In the non-custodial model, investors are not required to pre-deposit fiat or cryptocurrency funds when trading cryptocurrencies. Users deposit their net amounts into their Anchorage accounts within the settlement period, allowing them to withdraw profits daily without affecting their trading limits.
Following the collapse of FTX, criticism was drawn towards cryptocurrency exchanges for failing to separate custody, market-making, and trading operations, as this could lead to conflicts of interest and market manipulation. Paul Veradittakit, a managing partner at Pantera, an investment firm in cryptocurrencies, emphasized the need for a non-custodial service model to manage risks for institutional participants and address the complexities of liquidity and operational efficiency in the current cryptocurrency environment.
Veradittakit mentioned that other supporters of EDX include prominent figures in the traditional financial sector, with the latest round of investors including previous supporters Citadel Securities, Virtu Financial, Sequoia Capital, and Fidelity Digital Assets. In this round of financing, investors reportedly acquired shares at double the price of the initial investment in 2022. Other investors in EDX include Charles Schwab Corp., GSR Markets, GTS, Hudson River Trading, Miami International Holdings Inc., and Paradigm.
According to EDX, its clients had a nominal trading volume exceeding $1.4 billion in December, and the clearinghouse has settled over $3.1 billion in transactions since its launch in October last year. Nazarali stated that following the approval of a Bitcoin spot ETF, EDX clients traded over $100 million within a single 24-hour period this month.
Nazarali noted that EDX observed larger Bitcoin ETFs trading at higher prices than the market’s expected fair value, while smaller ETFs traded at a discount. He mentioned the existence of arbitrage opportunities but emphasized the need to handle actual coins to capitalize on them.