SEC Probing Binance US’ Ties with Two Affiliate Market Makers
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The US Securities and Exchange Commission (SEC) is investigating the ties of Binance US, the American affiliate of the similarly-named global crypto exchange, with two of its affiliate market makers, The Wall Street Journal reported on Tuesday.
Sigma Chain AG and Merit Peak Ltd. are the companies in question that have traded cryptocurrencies on the US arm of Binance as market makers since 2019, shortly after the establishment of the exchange.
Market makers maintain
liquidity
Liquidity
Liquidity is at the core of every broker’s offering. It is a basic characteristic of every financial asset – be it a currency, stock, bond, commodity or real estate. The more liquid an asset is, the easier it is to sell and buy on the open market. Foreign exchange is considered to be the most liquid asset class.Brokers can source liquidity from a single or multiple source, thereby delivering to their clients enough market depth for their orders to get filled. The main characteristic of liquidity is its depth, which will determine how quickly and how big of an order can be executed via the trading platform.Understanding LiquidityLiquidity can be internal or external depending on the size and the book of the broker. Companies which are large enough and have material client flows consistently are creating their own liquidity pools from the order flow of their clients, thereby internalizing flows and saving on costs to send customer orders to the interbank market. By doing that however they are exposing themselves to carry the risk on the trade.Liquidity providers can be prime brokers, prime of primes, other brokers or the broker’s book itself. Traditionally brokers are split between internalizing flows and offloading trades of their clients to different liquidity providers.Generally, retail brokers and their clients prefer more liquid assets which lead to better fill rates and less slippage. When there is lack of liquidity on a certain market, slippage can occur – the order is executed at a price which is the closest available to the one requested by the client.
Liquidity is at the core of every broker’s offering. It is a basic characteristic of every financial asset – be it a currency, stock, bond, commodity or real estate. The more liquid an asset is, the easier it is to sell and buy on the open market. Foreign exchange is considered to be the most liquid asset class.Brokers can source liquidity from a single or multiple source, thereby delivering to their clients enough market depth for their orders to get filled. The main characteristic of liquidity is its depth, which will determine how quickly and how big of an order can be executed via the trading platform.Understanding LiquidityLiquidity can be internal or external depending on the size and the book of the broker. Companies which are large enough and have material client flows consistently are creating their own liquidity pools from the order flow of their clients, thereby internalizing flows and saving on costs to send customer orders to the interbank market. By doing that however they are exposing themselves to carry the risk on the trade.Liquidity providers can be prime brokers, prime of primes, other brokers or the broker’s book itself. Traditionally brokers are split between internalizing flows and offloading trades of their clients to different liquidity providers.Generally, retail brokers and their clients prefer more liquid assets which lead to better fill rates and less slippage. When there is lack of liquidity on a certain market, slippage can occur – the order is executed at a price which is the closest available to the one requested by the client.
Read this Term in the trading market by continuously buying and selling assets, making money from bid-ask spreads. Sometimes, they can have an unfair advantage over regular traders, especially in unregulated markets of cryptocurrencies.
Illicit Ties?
The SEC is primarily looking into the relations of Binance’s CEO Changpeng Zhao, who is the largest shareholder in Binance US, and the two market makers, Sigma Chain AG and Merit Peak Ltd. Corporate documents from 2019 show that Zhao controls both the market-making entities and that can create a conflict of interest.
However, Binance declined to furnish any details officially, saying that it is a privately held company and is not obliged to disclose details of its investors or corporate structure to the public. But, it is open to sharing information with regulators, according to a Binance spokesperson.
The SEC first subpoenaed the US arm of Binance in late 2020, seeking information about the stakeholders, business model and other disclosure-related information.
But, the lack of proper regulation of cryptocurrencies makes it harder to properly investigate crypto exchanges and their affiliates. To proceed with the probe, the SEC needs to first prove that some of the digital assets offered by Binance US fall under the category of securities and come under its jurisdiction.
The US Securities and Exchange Commission (SEC) is investigating the ties of Binance US, the American affiliate of the similarly-named global crypto exchange, with two of its affiliate market makers, The Wall Street Journal reported on Tuesday.
Sigma Chain AG and Merit Peak Ltd. are the companies in question that have traded cryptocurrencies on the US arm of Binance as market makers since 2019, shortly after the establishment of the exchange.
Market makers maintain
liquidity
Liquidity
Liquidity is at the core of every broker’s offering. It is a basic characteristic of every financial asset – be it a currency, stock, bond, commodity or real estate. The more liquid an asset is, the easier it is to sell and buy on the open market. Foreign exchange is considered to be the most liquid asset class.Brokers can source liquidity from a single or multiple source, thereby delivering to their clients enough market depth for their orders to get filled. The main characteristic of liquidity is its depth, which will determine how quickly and how big of an order can be executed via the trading platform.Understanding LiquidityLiquidity can be internal or external depending on the size and the book of the broker. Companies which are large enough and have material client flows consistently are creating their own liquidity pools from the order flow of their clients, thereby internalizing flows and saving on costs to send customer orders to the interbank market. By doing that however they are exposing themselves to carry the risk on the trade.Liquidity providers can be prime brokers, prime of primes, other brokers or the broker’s book itself. Traditionally brokers are split between internalizing flows and offloading trades of their clients to different liquidity providers.Generally, retail brokers and their clients prefer more liquid assets which lead to better fill rates and less slippage. When there is lack of liquidity on a certain market, slippage can occur – the order is executed at a price which is the closest available to the one requested by the client.
Liquidity is at the core of every broker’s offering. It is a basic characteristic of every financial asset – be it a currency, stock, bond, commodity or real estate. The more liquid an asset is, the easier it is to sell and buy on the open market. Foreign exchange is considered to be the most liquid asset class.Brokers can source liquidity from a single or multiple source, thereby delivering to their clients enough market depth for their orders to get filled. The main characteristic of liquidity is its depth, which will determine how quickly and how big of an order can be executed via the trading platform.Understanding LiquidityLiquidity can be internal or external depending on the size and the book of the broker. Companies which are large enough and have material client flows consistently are creating their own liquidity pools from the order flow of their clients, thereby internalizing flows and saving on costs to send customer orders to the interbank market. By doing that however they are exposing themselves to carry the risk on the trade.Liquidity providers can be prime brokers, prime of primes, other brokers or the broker’s book itself. Traditionally brokers are split between internalizing flows and offloading trades of their clients to different liquidity providers.Generally, retail brokers and their clients prefer more liquid assets which lead to better fill rates and less slippage. When there is lack of liquidity on a certain market, slippage can occur – the order is executed at a price which is the closest available to the one requested by the client.
Read this Term in the trading market by continuously buying and selling assets, making money from bid-ask spreads. Sometimes, they can have an unfair advantage over regular traders, especially in unregulated markets of cryptocurrencies.
Illicit Ties?
The SEC is primarily looking into the relations of Binance’s CEO Changpeng Zhao, who is the largest shareholder in Binance US, and the two market makers, Sigma Chain AG and Merit Peak Ltd. Corporate documents from 2019 show that Zhao controls both the market-making entities and that can create a conflict of interest.
However, Binance declined to furnish any details officially, saying that it is a privately held company and is not obliged to disclose details of its investors or corporate structure to the public. But, it is open to sharing information with regulators, according to a Binance spokesperson.
The SEC first subpoenaed the US arm of Binance in late 2020, seeking information about the stakeholders, business model and other disclosure-related information.
But, the lack of proper regulation of cryptocurrencies makes it harder to properly investigate crypto exchanges and their affiliates. To proceed with the probe, the SEC needs to first prove that some of the digital assets offered by Binance US fall under the category of securities and come under its jurisdiction.
Cryptocurrency
