Trading software provider Trading Technologies International Inc said on Thursday it has teamed up with crypto-currency exchange operator Coinbase to give institutional traders direct market access to both bitcoin and bitcoin futures beginning in March.
The partnership means that large trading firms will have both bitcoin spot prices and bitcoin futures on the same screen, positioning them to potentially reap more profits trading the spread between the two financial products.
The firms withheld the financial terms of the deal.
Much of the interest in trading bitcoin has come from retail traders, but institutional participation has been picking up steam, especially over the past year, Adam White, general manager of Coinbase’s Global Digital Asset Exchange (GDAX), one of the biggest cryptocurrency exchanges, said in an interview.
“This is the first time hundreds, if not thousands of institutional clients will have the ability to trade the crypto spot market side by side with 45 other markets,” he said.
Trading Technologies, known as TT, is connected to 45 markets worldwide, including CME Group (CME.O) and Cboe Global Markets Inc (CBOE.O), which both introduced bitcoin futures trading in December.
The cash-settled futures give speculators a chance to short bitcoin, meaning they are betting the price of the underlying security will fall. One bitcoin was worth around $11,150 on Thursday morning, down from a high of around $19,000 last month.
TT also counts Goldman Sachs Group Inc (GS.N) , JPMorgan Chase and Co (JPM.N), and most other Wall Street banks as clients, as well as many Chicago- and London-based proprietary trading firms.
“We’ve had a lot of demand from the institutional trading community, everything from the traditional buy-side, hedge funds, managed accounts, the prop community, that I think have been looking for a bridge like this as a way to trade the crypto markets against the cash markets,” Rick Lane, TT’s chief executive officer, said in an interview.
The Chicago-based firm will also be rolling out enhanced surveillance tools to help police crypto-trading in the coming months, Lane said.
Coinbase, which is regulated under the New York Department of Financial Services BitLicense, also said it would soon introduce a new custodian offering with strict financial controls and secure storage for institutional traders wanting to trade digital currencies like bitcoin.