Swarm Markets to launch decentralized OTC trading
Swarm Markets’ dOTC smart contracts enable institutions and professional investors to make high-value peer-to-peer crypto and NFT block trades.
Swarm Markets will launch a peer-to-peer OTC service in Q1 2022 using smart contracts to disintermediate high value crypto and NFT transactions — the first of its kind to be offered by a regulated company. The so-called dOTC service empowers institutions and professional investors to carry out large volume trades directly with other Swarm Markets platform users, replacing costly and time-consuming traditional over-the-counter (OTC) trading.
Swarm Markets’ dOTC service eliminates counterparty risks by restricting eligible transaction participants to users verified on its platform, which is regulated by Germany’s Federal Financial Supervisory Authority (BaFin). For the first time, institutions with a fiduciary responsibility now have a compliant trading tool they can use to minimize or avoid crypto slippage.
High volume swap activity on decentralized exchanges has increased significantly in the past year. According to a report by Messari Hub, the number of unique traders executing trades over $500k has increased by 140% from March to September 2021. However, to date, there is no block-trade P2P smart contract available to institutions that removes counterparty risks.
Carrying out an OTC trade is typically a complex process, requiring costly intermediaries who participants need to trust and who charge substantial fees in return for guaranteeing the safety of a trade.
Trustless execution of a Swarm Markets’ dOTC smart contract eliminates the need for intermediaries so users can carry out trades independently. The dOTC contract enables platform users to safely execute a buy or sell order directly with other platform users in minutes instead of days or weeks — and for a tiny fraction of the price.
Swarm Markets extends the innovations of DeFi to include OTC, disintermediating one of the most centralized aspects of crypto finance, while providing the same level of consumer protection as traditional financial institutions.
For example, dOTC replaces escrow accounts used in the traditional OTC world with self-custody, so participants have control over their assets at all times. The dOTC contract ensures both counterparties are verified users with control of sufficient assets for a successful trade prior to execution, replacing the need for manual proof-of-funds checks and repetitive KYC procedures for each trade.
The dOTC contract can be used for a wide range of digital assets, from ERC20 to ERC721 and ERC1155, enabling participants to trade high value NFTs and to facilitate smoother liquidation of crypto positions. dOTC will also enable contract-based block trades for upcoming regulated digital securities, further extending the cost savings available to high volume traders.
Institutions have very few, if any, viable and trusted trading tools in DeFi to help ride out crypto volatility. According to a report from CompareBrokers, bitcoin volatility rose by up to 86% in December 2021 and has done so in December for the past 10 years. High volatility results in a greater risk of high slippage for larger trades.
The licenses granted by BaFin put Swarm Markets in a unique position to offer decentralized trading infrastructure in both crypto and traditional financial products. The dOTC contract will become a key piece of infrastructure for institutions to support bulk selling and buying of securities on-chain via the Swarm Markets platform.
Swarm Markets’ dOTC service will be open to all users who have onboarded to the platform and new assets eligible for dOTC trading will be added in the coming weeks.
To talk to us about dOTC services, please email swarm@swarm.markets
