As published on coindesk.com, Thursday December 5, 2019.
A team of Morgan Stanley veterans has launched a crypto derivatives trading platform, claiming it is faster and more secure than some of the market’s biggest players.
Jack Tao, who served as a senior leader at Morgan Stanley's electronic trading desk, said he launched Phemex last month with a team of more than 30 developers, including eight executives from the investment banking giant.
Tao left his job at Morgan Stanley in New York and co-founded the crypto trading firm in Singapore in July, envisioning a platform that would be as fast and secure as stock and futures exchanges.
The budding firm has made some big promises.
“Phemex is ten times faster than traditional crypto trading platforms with the ability to manage 300,000 TPS – the fastest matching engine online,” said Tao, who specialized in high-frequency trading. No existing platform has achieved such transaction speeds, he said.
Phemex’s architecture can reduce latency so as to deliver an order entry and response time of less than one millisecond while maintaining stable APIs for algorithmic trading, according to Tao.
While crypto trading is fiercely competitive, Tao believes Phemex has a comparative advantage as a small platform.
“Big trading platforms such as CME [Chicago Mercantile Group] are very great platforms for traditional securities trading, but that’s also why they are relatively slow to adopt new technologies to trade digital assets,” Tao said.
Such platforms take longer to integrate new technologies and to become compliant with know-your-customer (KYC) and anti-money-laundering (AML) regulations than smaller, nimbler firms, he said.
Phemex offers retail and institutional investors perpetual contracts for bitcoin, ethereum and XRP with up to 100 times leverage. These are similar to futures contracts, except they have no expiration date.
As the exchange gains traction, it plans to also offer contracts backed by traditional financial products, including stock indexes, interest rates and commodities, Tao said.
The ex-Morgan Stanley developers have created their own hierarchical deterministic cold wallet system. It assigns an independent deposit address to each user to keep assets in the cold wallets directly.
The move to Singapore is aimed at meeting demand in the Asian markets with a more favorable regulatory environment, Tao said. The Monetary Authority of Singapore (MAS) announced last month that it would allow crypto-based derivatives to be traded on regulated platforms.