A pair of former Jefferies Financial Group Inc. executives at Crossover Markets Group have launched a cryptocurrency exchange aiming for high-frequency traders, with the backing of quant investing giant Two Sigma and other firms in traditional finance and digital assets.
(Bloomberg) — A pair of former Jefferies Financial Group Inc. executives at Crossover Markets Group have launched a cryptocurrency exchange aiming for high-frequency traders, with the backing of quant investing giant Two Sigma and other firms in traditional finance and digital assets.
Brandon Mulvihill and Anthony Mazzarese, who left Jefferies’s foreign-exchange prime brokerage division last March, are debuting the crypto trading venue, named CROSSx, with Vlad Rysin, previously chief technology officer at Euronext FX. The startup raised $6.35 million in seed round financing from New York-based Two Sigma, Nomura’s digital assets business Laser Digital, Wintermute, Flow Traders and a group of retail brokers, among others.
Crossover seeks to offer faster matching engine services for trades than existing crypto exchanges. And unlike popular crypto platforms such as Coinbase Global Inc. and Binance, it only provides execution of the trading and doesn’t provide custodian or prime brokerage services. At launch, the platform will support spot trading and will expand to crypto derivatives later, targeting international institutional investors outside the US.
The founders are betting that as crypto markets mature and more traditional trading firms enter the sector, the need to compete on speed of orders will be more pressing, resulting in a race to reduce latency — the amount of time that passes from the moment a trade is initiated to its receipt — in digital assets. Rather than using cloud servers, Crossover hosts its production servers physically in London at Equinix’s data center. It can process trade orders in less than 20 microseconds, mimicking high-frequency trading speed in traditional markets.
That idea attracted quantitative trading firms such as Two Sigma as well as crypto-native firms like Wintermute to invest in the company. “They can see themselves using the platform and interacting with the platform. They want to participate, not just in having an equity stake, but also helping the company and providing feedback and being a player in early days,” said Mulvihill, chief executive officer of Crossover, in an interview.
Jeff Wecker, Two Sigma’s CTO, said in a release that the company is “excited to support” Crossover and that “as the digital assets space evolves, diverse and reliable execution venues for institutional trading are critical.”
Initially planned for a debut last year, Crossover’s launch was delayed due to market conditions in crypto, the founders said. The industry landscape has shifted dramatically with the downfall of high-profile firms such as FTX exchange and increased scrutiny by global regulators. In recent weeks, the traditional financial markets and crypto sector have also been roiled by a series of sudden bank failures, such as Silvergate Capital Corp., Signature Bank and Credit Suisse.
As a result, the timeline for fund-raising has been extended and backlogged, as investors take months conducting due diligence on startups. Furthermore, “every time there’s a market dislocation, companies need to stop and reassess their own risks internally” before moving to sign on new products, said Mulvihill.
Crossover currently has nine people, with a main office in London. It will aim to expand “moderately” this year, reaching no more than 15 to 20 people, said Mulvihill.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.