Marketplace for Security Tokens and Digital Assets

Digital asset trading presents many challenges to interested parties, some of which are technical and some regulatory in nature. This is not only true for traditional cryptocurrencies, but also for many other forms of digital assets, such as security tokens.

Although there are many security tokens coming to the market, there is still not an easy way for professional traders to trade security tokens. However, the SIX Digital Exchange owned by the SIX Group is working on solving this problem.

Blockchain technology has the potential to modernize, simplify, or even potentially replace current trading and clearing and settlement operations.”

– Mary Jo White, U.S. Securities and Exchange Commission Chairwoman

In addition to the SIX Digital Exchange, Liechtenstein also has a token issuance platform, called area2invest. As a tied agent of Bank Frick & Co. AG, the fintech company built a network of banks, brokers, asset and fund managers in order to become Europe’s first marketplace for securities and token issuances.

Another one of Switzerland’s banks that are involved in crypto is Swissquote Group Holding SA. Professional and retail traders can trade Bitcoin and 11 other cryptocurrencies. In 2020, the bank started offering regulated institutional cold storage, and it is already used by WisdomTree and other institutional clients. In terms of the custody solution, one of Swissquote’s technology partners is Switzerland’s Crypto Storage AG, which is a subsidiary of Crypto Finance AG. While Crypto Storage’s solution has been used as the foundational layer, Swissquote has built its own additional security layers upon it. The other main pillar is Swissquote’s trading platform. Swissquote has an API (FIX and Websocket), so its institutional clients are able to access liquidity. APIs are Application Programming Interfaces that allow trusted larger partners to communicate directly with one another super quickly and without barriers — like having a phone line that is always open. FIX is what traditional financial institutions generally use for the electronic transfer of financial data. Websocket is a more modern version of FIX that is often preferred by crypto funds. For larger orders, the bank also supports OTC trades.

Currently, Swissquote’s DLT/Blockchain team already counts twenty team members, reassuring that all the different processes and procedures work just fine — be it in the front office, development, compliance or risk. Concerning fees, Swissquote’s crypto retail pricing is, on the face of it, more expensive than most of the unregulated exchanges. Fees range from 0.50 and 0.99 percent. This is due to a combination of reasons, including the fact that Swissquote is a highly regulated Swiss bank with operating costs much higher than most of its crypto exchange competitors. Oftentimes traders use different exchanges to send crypto assets around. This costs additional gas fees, which can make the overall transaction cost of trading through “cheaper” unregulated exchanges just as expensive as using a regulated platform such as Swissquote.

Staying within Swissquote’s ecosystem will save a trader these kinds of fees. On the institutional side, the fees are very competitive and they can be tailored to an institution’s needs. Interestingly, Swissquote has quite some plans for the future regarding blockchain and crypto assets. As a matter of fact, the bank wants to expand into Bitcoin futures and options, tokenized securities and staking. Many of these new features are planned for Q1 of 2021.

Online trading platforms need to find the right balance between a rich feature set and user-friendliness. However, it is precisely through saving on fees that a plus in user-friendliness can be gained, without this having to be at the expense of the feature richness. This is especially clear when the concentration of numerous functions in one place itself provides the basis for the savings.

This article is an extract from the 70+ page Discovering Institutional Demand for Digital Assets research report co-published by the Crypto Research Report and Cointelegraph Consulting, written by eight authors and supported by SIX Digital Exchange, BlockFi, BitmainBlocksize Capital, and Nexo.