The Integrity of Virtual Markets
Comments on the recent New York Attorney General report
The New York Attorney General’s office released a comprehensive 42-page report this week regarding digital currency exchanges. The Virtual Markets Integrity Initiative drew from voluntary surveys sent out in April of this year to 14 of the most well-known exchanges. Ten willingly participated, while the remaining four declined. The goal of the initiative and report was to “provide the public with much-needed clarity regarding basic practices and functionality” of exchange platforms.
A lot of what happens “under the surface” at exchanges today is less than transparent. For example, a staggering 20% of Coinbase’s executed volume is attributable to its own trading, a potentially severe conflict of interest.
Let’s take a look at the report
There are three broad concerns illustrated in the report that Attorney General Underwood emphasized in the following tweetstorm:
1. Fairness
2. Integrity
3. Security
The concerns that Underwood raises are also concerns of ours here at LXDX. And they should be concerns of yours, too.
Our response
We are committed to equality of all traders on our platform — fairness is a necessity for a truly free market. The LXDX exchange utilizes real-time market surveillance procedures to monitor for suspicious trading activity such as price manipulation and collusive trading.
The status quo often merely give lip service to integrity. In contrast, LXDX employees don’t trade on any of our products. Period. We don’t market make on our own platform, except as a matter of last resort or issuance — and we always mark fill confirmations if we act as the counterparty and never charge fees when we take the other side of trades.
We are audited regularly and built information security into our products from the ground up. Steven Thomas, LXDX CTO and former cryptologist for the US Navy:
“Between our software, hardware custody solutions, and real-time trade surveillance, we are setting the standard for security and trust in the industry. We’ve structured the LXDX system to enable ultra-secure information compartmentalization.”
We utilize multi-layer information security, hot and cold wallet storage, and third-party auditing to ensure our users — and their assets — are safe.
Implications
The report released by the NYAG is indicative of an evolving industry. It is important for us to shed light on questionable practices by many of the “trusted” exchanges in the ecosystem today to help mature our community.
Underwood went so far as to accuse three exchanges of potentially operating unlawfully and referred them to the DFS:
As the markets for digital assets continue to grow, more scrutiny and regulation is inevitable and desirable. We as participants have a responsibility to operate ethically and to protect our customers from the kinds of abuses that are prevalent in the environment today. We at LXDX are committed to leading by example and making capital markets better.
About LXDX
LXDX is a cryptocurrency exchange platform that achieves the best prices by empowering all traders with the powerful technology previously accessible only by elite institutions. Join the conversation on Telegram.
