Ex-Morgan Stanley Developer’s Derivatives Exchange Challenges Crypto’s Status Quo
Last week marked the launch of Phemex, a cryptocurrency derivatives exchange launched by Jack Tao, previously the global development leader of Morgan Stanley Electronic Trading’s benchmark strategy. According to Reuters, the platform can process 300,000 transactions per second and delivers a response to orders in a millisecond, December 5, 2019.
Improving Financial Infrastructure
The most important part of creating a liquid market is having high functioning financial infrastructure that can cater to the needs of savvy participants. If we reach a cumulative market cap of $1 trillion with high liquidity, existing infrastructure will not scale, as evidenced by BitMex’s frequent server overloads.
Phemex looks to build on these weaknesses and launch contracts with low latency and high throughput. During high volatility moves, most derivatives exchanges face back end issues that ultimately hinder user experience and create unfavorable situations. As of now, FTX seems to be the only exchange capable of holding their servers together during high volume moves.
Morgan Stanley’s internal trading systems would have emphasized on low latency and the ability to enter multiple high volume orders with minimal slippage, owing to the sheer size of their operations. Jack Tao and his team are likely to use their insight building highly robust systems to bring that degree of efficiency to the cryptocurrency world.
Phemex wants to bring other contracts such as stocks, commodities, and currencies in addition to their cryptocurrency stack. This would give them an edge as a one-stop-shop for traders who look for opportunities across various markets. At the moment, the platform only has BTC, ETH, and XRP contracts.
Coming for BitMex’s Golden Throne?
As one of the oldest derivatives exchanges in crypto, BitMex had the advantage of entering a nascent industry and establishing their base with little to no competition. Now that the demand for derivatives is skyrocketing, BitMex is facing competition from the likes of Deribit, FTX, and even institutional platforms like CME and Bakkt.
Phemex’s USP of high response trading gives them a direct edge over BitMex by turning their biggest weakness into a strength. Many traders in the space are fed up with BitMex’s frequent server overloads, but they have no option but to deal with it because no other platform has the same degree of liquidity.
If Phemex is coming for BitMex’s crown, it best not miss.