Gemini Support For Block Trading May Consolidate Cryptocurrency Markets

Gemini will soon facilitate block trading of digital assets. The service, which connects buyers and sellers of large quantities of digital assets, will operate separately from Gemini’s existing order books.

  • At 9:30 a.m. ET on April 12, 2018, Gemini – the brainchild of the Winklevoss twins – will launch a block trading service to facilitate the private exchange of digital assets.

    Block trading is the private purchase or sale of large quantities of an asset between entities. This approach is commonly employed by institutional investors and hedge funds in the stock market. They do this to avoid dramatically affecting prices in the open market.

    For instance, imagine that I wanted to purchase 10,000 shares in Apple (AAPL). At current prices ($170 per share), that would be a $1.7 million transaction. If I submitted the AAPL order through my regular brokerage account, I may disturb the market pretty badly and spend significantly more than I want to for my investment.

    Instead, I might approach a block house to arrange the deal. It might connect me with a seller (or a handful of sellers), and we could conduct the large transaction privately and non-competitively at an agreed upon price.

    Block trading functions very similarly in the cryptocurrency world. In fact, arranging large over-the-counter cryptocurrency trades has become a popular business. According to Reuters, at least three firms are currently doing this in the US, including Cumberland Mining (a division of DRW Holdings), Circle, and Genesis Global Trading.

    If Gemini enters the block trade market, it seems likely to eat into the business of these other companies. This is because Gemini has established itself as a trustworthy and regulation-compliant cryptocurrency trading platform, and the company could probably offer its services for cheaper because it already oversees order books for bitcoin and Ether. The company is also involved in other cryptocurrency-related financial products like bitcoin futures.

    In its announcement, Gemini explained how its block trading platform will function:

    “Any customer can place a block order that specifies: (i) buy or sell, (ii) quantity, (iii) minimum required fill quantity, (iv) and a price limit (the ‘Indication of Interest’). Market makers only receive quantity, minimum quantity, and the collar price — they do not receive any other information (i.e., side, price limit, etc.) related to the block order. If a market maker agrees to ‘make a market’ that satisfies the Indication of Interest, the block order will be filled.”

    It’s not apparent whether there is a minimum order size for participation in Gemini’s block trading platform.

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