Pricing Transparency: Is what you see really what you get?
Pricing transparency is one of the key needs for any exchange. Buyers and sellers deserve to know that their trades are going to be handled fairly, the source of pricing data, and that they are receiving the best prices. Unfortunately, this kind of transparency is not always a given in the world of cryptocurrency, but market leaders should strive to make it so.
Currently, exchanges are not required to report their pricing structures and this lack of regulation has caused a number of issues. Most recently we saw coin prices being manipulated by bots. According to a recent story in the Wall Street Journal, the bots engage in “spoofing,” essentially creating fake orders and subsequently canceling them. This creates a false impression that there is more supply or demand than there truly is, potentially resulting in significant price changes. It goes on to note that the U.S. stock market and futures markets banned the use of these programs nearly a decade ago.
The issue is so significant that earlier this year, the U.S. Department of Justice opened a criminal investigation into whether rogue traders were engaging in these types of practices as the prices of BTC, ETH and other cryptocurrencies shot up toward the end of 2017. Rogue traders also engaged in what are known as “Wash Trades,” where they trade with themselves to drive up the price. This is why pricing transparency is so critical.
With improved transparency, investors will be in a better position to guard against this and other manipulative efforts. We at Altonomy recognize the significance of pricing transparency for our customers and the market as a whole. Clear and fair pricing is one of the core benefits we offer our clients because we know that customers expect as much information as possible for their transactions.
We’ve recently established a partnership with trueDigital, the first exchange approved by the Commodity Futures Trading Commission (CFTC) as a Designated Contract Market (DCM) for physically delivered Bitcoin swaps contacts (see their recent announcement here). We, along with numerous other partners have been providing quotes to trueDigital’s index, helping to protect it against any sort of manipulation. This is a significant milestone in cryptocurrency trading. I believe the CFTC, as well as other regulators and investors, will feel more comfortable with this index due to the high liquidity and price transparency.
Transparency means so much for those trading in crypto, equities, futures and other investment vehicles. It means narrower spreads, higher order book depth and overall comfort for investors. Until a robust regulatory landscape is in place, it’s up to the private sector to deliver transparency to their customers and the sense of security that accompanies it. And we at Altonomy will continue to do precisely that.