BitMEX CEO: Exchanges should abandon market makers

Bitcoin exchanges that make money from prop trading should refuse the services of internal market makers. This was stated by the acting CEO of BitMEX Stefan Lutz.

In his opinion, high-frequency traders and private trading are enough for large platforms.

Earlier, the media learned about the organization of a prop trading unit by the Crypto.com platform, whose employees undertook not to talk about their work.

Lutz has openly stated that the company is also hiring internal traders. They work for a separate legal entity, Arrakis Capital, which was once a major internal market maker for BitMEX.

Today Arrakis functions are reduced to “treasury”. With only a handful of employees, the platform is “technologically” and “organizationally” separate from the exchange, according to Lutz.

According to the statement of the head of the company, Arrakis performs the following functions:

converting commissions into fiat currency;

hedging the impact of BitMEX on assets held as reserves;

creating markets for the native BMEX token.

Lutz noted that the division makes “insignificant profits” – up to $100,000 a month – from holding Treasury bills.

All trading platforms employ internal traders, he said, but since the FTX crash, the practice has gained more attention.

Exchanges that charge little or no transaction fees could also be seen as a “red flag”, signaling that their role is primarily to attract trade flow for the market maker, Lutz warned.

Recall that in December 2022, BitMEX implemented a decision to confirm commitments. The company has committed to provide information on its reserves every week.

Source: bitcoinlinux.com