High-Frequency Trading Is Newest Battleground in Crypto Exchange Race

As reported by CoinDesk, “A handful of cryptocurrency exchanges are rolling out the red carpet for high-frequency traders.

“Huobi, based in Singapore, and ErisX, in Chicago, have separately begun offering colocation, in which a client’s server is placed in the same facility or cloud as the exchange’s, officials at each exchange told CoinDesk. This allows those investors to execute trades up to a hundred times faster, giving them an edge over the rest of the market.

“These exchanges join Gemini, which was one of the first crypto firms to offer colocation at a popular data center in the New York area, and is about to expand the option to include a second site in Chicago.

“Notably, none of these exchanges charges for the service, seeing it as a way to differentiate themselves. ‘It’s our competitive advantage,’ said Andrey Grachev, head of Huobi Russia, the exchange’s Moscow client office.

“To be sure, such accommodations remain rare in crypto, which historically was dominated by individual traders and only recently began to draw interest from institutional investors such as hedge funds and family offices.

“But the exchanges’ moves are a sign that high-frequency trading (HFT), a longtime and controversial practice in traditional financial markets, is slowly entering the crypto sphere. And though ‘bots‘ have been present in crypto since the days of Mt. Gox, colocation takes algorithmic trading to a different level.

“Eric Wall, former crypto and blockchain lead at Cinnober, a financial technology company acquired by Nasdaq, told CoinDesk:

“‘It’s big business, everyone I’ve been speaking to that runs an exchange mentioned being approached by Wall Street types with these kinds of requests.’”

Continue to see the full story on CoinDesk.

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