Crypto Trading

Andreas Park

  • This deck supplements my four part lecture series on Blockchain Technology in Finance
  • TWO parts
    • Trading in equity markets today
    • Trading in crypto-securities (including coins and tokens)
  • Please note: this presentation is under no circumstances to be taken as investment advice or encouragement to engage in activities that may violate current securities law.

Content Overview

Narrated Version on             

Types of traders

Trading in Equity Markets today

Retail

Institutional

Pro-Traders

Exchanges

Wholesellers

Dark pools

Broker Internalizations

Where does trading occur?

Trading in Equity Markets today

Exchanges

Wholesellers

Dark pools

Broker Internalizations

How does trading work?

Trading in Equity Markets today

(

(

How to access the market?

Trading in Equity Markets today

Retail

Institutional

Pro-Traders

Retail: Canada

Trading in Equity Markets today

Rule: must send to exchange with best price 

Retail: U.S.A.

Trading in Equity Markets today

Exchange

Wholeseller

market order

limit order

In Europe: no best price obligation

Institutions: U.S.A.

Trading in Equity Markets today

Exchange

Dark pools

Pro Traders

Trading in Equity Markets today

Type 2: "borrow" broker-dealer system

Type 1: licenced broker-dealer

risk control

Big Message

Trading in Equity Markets today

  • You commonly don't access the market directly.

  • Brokers take many decisions but they are bound by regulations.

  • Critical: markets are formally linked by best-price rules.

A glimpse of overall infrastructure

Sue wants to sell ABX

Bob wants to buy ABX

sell order

buy order

Clearing House

Stock Exchange

Broker

Broker

3rd party tech

custodian

custodian

record beneficial ownership

central bank for payment

Types of traders

Trading in Crypto Markets

Retail, Institutions, and Pro-Traders are indistiguishable

not clear whether and which institutions are active 

Where does trading occur?

Trading in Crypto Markets

Exchanges

Dark pools

Smart On-chain contracts

Exchanges

Smart Contract

How does trading work?

Trading in Crypto Markets

Order Driven

Market Maker

How do you access the market?

Trading in Crypto Markets

Exchanges

Smart On-chain contracts

Within exchange operation

Trading in Crypto Markets

trade

lend

Settlement

Trading in Crypto Markets

trade

Fully decentralized

... 300 lines of code ...

Summary of workflow

Crypto

Exchange

Traditional

Internalizer

Wholeseller

Darkpool

Investor

Venue

Broker

Settlement

Investor

Venue

Settlement

On chain

Main differences

Trading in Equity vs Crypto

  • regulated environment
  • firm trading rules
  • listing requirements
  • multi-step process
  • complicated settlement
  • many intermediaries

Equity Market

Crypto Market

  • unregulated environment
  • no trading rules - manipulation must be assumed
  • single step process
  • use of intermediaries is a choice
  • crypto exchange are closer to brokerages than equity exchanges
  • settlement a choice and straightforward
  • fully decentralized trading is possible

Some data

based on Khapko, Malinova, Park, and Zoican (2018)

Some data

Some data

Some data

Blockchain Module Part 6: Crypto Trading

By Andreas Park

Blockchain Module Part 6: Crypto Trading

This deck supplements my four-lecture series on Blockchain technology in Finance, taught at the Rotman School of Management, Spring 2018. It covers the trading of crypto securities. There is a narrated youtube videos associated with this presentation: https://www.youtube.com/playlist?list=PLTmzBTSqnXds7h6xEUplQIhO7DPHQdIjO Slides were updated on Oct 4, 2018 to include trading stats

  • 1,135