Inspired innovation — How we built an institutional crypto trading platform for professional investors

November 2021 in Traders Workshops

Cryptocurrency has grown from the first bitcoin to a $2.5 trillion+ asset class in just over a decade, according to CoinMarketCap. That may sound like an industrial-strength sector, but surprisingly few industrial-strength solutions exist to attract institutional traders into crypto. Fortunately, that is changing. Apifiny is a global digital asset trading network that is building one global market for trading digital assets, including sophisticated solutions that meet institutional crypto traders‘ extremely high standards. Professional traders are poised to play a vital role in the growth of crypto. First, however, they need tools matching their expectations for speed and ease of use. Apifiny has set out to deliver these and e-Forex asked their Execution Services team to tell us how they went about it.

Apifiny is a global execution platform that unlocks access to twenty-five, global exchanges on six continents through the convenience of a single account and set of APIs. It enables trading of multiple asset pairs, with 20% trading fee rebates, and instant reallocation between sub-accounts. All that’s needed is one deposit and onboarding, and traders can reallocate assets and start trading. Using Apifiny is easy. However, bringing it to life proved to be a complex journey for our team.

Seeing a need

The road to creating Apifiny’s platform began when Apifiny performed a thorough review of the institutional crypto trading platform landscape. The lack of global execution brokers and execution platforms that would meet and exceed the needs of professional traders quickly jumped out at us. Although there was talk from many other companies about building an industrial-grade execution platform, and still others that were calling their products execution platforms, nothing was the sort of solution that institutional crypto traders would use.

We saw in our survey that there was no execution platform with the speed and convenience needed to attract professional traders. These attributes would be necessary to bring them onboard, as well as some new innovations that could only happen in the crypto world.

With our crypto trading background, we realized that we had a tantalizing opportunity to bring something entirely new to the sector. As we observed the price discontinuities between various exchanges across the world, we quickly saw that there was no true global market for Bitcoin and that there is no “one global price.” We also found that crypto liquidity was a problem. We  could move the Bitcoin price with much smaller orders than it would take to have the same impact in traditional equity markets.

If Apifiny could create a global execution platform for the crypto world, we could help build up the industry by finally making it ready for institutional traders. We knew we had found a solid starting block. We also knew that building it would be easier said than done. “Industrial-grade” is more than just a label. It means a bug-free platform with the scalability that is familiar to institutional traders. These characteristics stand in contrast to what was available when we began work on Apifiny Connect in the Spring of 2019. At that time, other execution tools that were already online would break on a near-daily basis. While retail investors play an essential role in crypto trading, they are generally more forgiving of faults with their trading tools.

However, the stakes are much higher for institutional crypto trading: trade size is generally more than $10K per trade, and the total capital deployed ranges from $100,000 to $100 million and more. They would also be trading 24×7 and probably do more than 1,000 trades daily — either on behalf of their clients that include banks, pension funds, mutual funds, insurance companies, or for their own books. Traders who are working with such large amounts of capital expect to quickly and confidently trade those positions —after all, millions of dollars are at risk if there’s a glitch.

Another challenge for institutional traders is the fact that digital asset exchanges are highly fragmented. Crypto trading is spread across hundreds of local exchanges, sometimes with significant price differences across exchanges and geographies. This presents both opportunities and challenges – cross exchange crypto arbitrage opportunities that cannot be executed due to a lack of global access.

ApifinyTM Connect enables professional digital asset traders to execute global strategies on over 25 connected exchanges, with one account, one API, and one onboarding.

Uncaptured opportunities include:

  • Cross-exchange arbitrage
  • Organic liquidity from other regions
  • Strategies based on more reliable, normalized market data and signals 

Still, structural challenges prevent many institutional traders from capitalizing on opportunities:

  • Accounts with multiple exchanges are required in order to exploit cross-exchange arbitrage opportunities – This leads to higher legal expenses due to multiple legal agreements and onboardings.
  • Cross-exchange transfers are required – Many trading strategies require simultaneous transactions on different exchanges, tying up capital while awaiting settlement.
  • Holding reserves on multiple exchanges is required – Reserves must be held on multiple exchanges to execute instantly, rendering capital unusable while transactions settle. 

One FIX API accesses all connected exchanges

Taking the first steps

We had identified the problem. Now it was time to roll up our sleeves and get started. The main phases of development for Apifiny Connect were:

Step 1: Create a global platform

Apifiny Connect was global from the word “Go!” We agreed that we had to think about this internationally, not regionally, and we based our technical development on enabling “One Account, Global Execution” with several innovations. Apifiny Connect takes on many of the major sources of friction that slow down global trading. Our operational improvements include:

Streamlined Onboarding — There is just one onboarding process to trade globally with Apifiny Connect.

Single Set of Trading APIs — Traders need just one set of APIs to manage their digital assets across dozens of exchanges, instead of a different API for each exchange.

Normalized Market Data — Apifiny Connect provides a normalized market feed, instead of having to monitor a different feed for each exchange.

Instant Rebalancing — Transfers between exchanges typically take 20-60+ minutes, but Apifiny Connect clients move faster with nearly instant rebalancing.

Convenient Deposits and Withdrawals — Instead of having to perform separate deposits and withdrawals for each exchange, Apifiny Connect clients can deposit and withdraw from one account. They can also transfer and rebalance via a single API.

It’s all built on a scalable infrastructure that can adapt quickly to clients’ changing needs. We are constantly in touch with our users and can add new features or connectivity quickly to help them roll out different strategies across different venues.

Step 2: Build the team

You can’t develop new technology without talent, so recruiting the right people was the first stage. We identified two areas requiring an exceptional skill set:

  1. Expertise in tech development for high-frequency trading
  2. Deep Internet experience, since many crypto exchanges are Internet protocol-based

Key hires included Andrew Banhidi, Head of Research & Technology Sales, who has decades of experience in information technology and services for the financial services industry for Bank of America Merrill Lynch and Goldman Sachs, among others. Since this is a global product, we also hired several APAC-based developers.

Step 3: Vet the Exchanges

The search was on from there for the digital asset exchanges to align with Apifiny Connect. Since our solution allows institutional traders to select a custom subset of leading exchanges to implement their trading strategies, that means weeding out the bad actors that report fake trading. We did extensive research to ensure that the exchanges were legitimate, with real liquidity and healthy trading volume. We made sure that they have proper KYC/AML processes in place.

Legal and compliance were running in parallel with each of these stages. We have an excellent legal team at Apifiny, and they’ve been there every step of the way, monitoring the latest developments in every country and state. Before exchanges were added to Apifiny Connect, they had to pass our rigorous Anti-Money Laundering/Counter-Terrorist Financing Policy Supplement and Know Your Customer Policy for institutional clients. Our policy is reviewed periodically and amended according to industry best practices, applicable laws, and international guidelines.

Another critical development phase has come into play as Apifiny Connect went live —perhaps the most exciting stage. Apifiny Connect’s clients are our partners; we want to listen to their ideas and make them a reality.

Apifiny Connect was global from the word “Go!” We agreed that we had to think about this internationally, not regionally

Elevating crypto trading

As the Apifiny Connect team moves forward, our mission is to make institutional crypto trading as robust as trading is in traditional finance.

It’s clear how much more mature, relatively speaking, the products are for traditional asset classes than they are for crypto. For example, many crypto exchanges can’t send more than ten orders per second—that’s inadequate in conventional trading where an exchange like Nasdaq can send up to 100,000 orders per second. Additionally, most of the crypto exchanges only support WebSocket and REST protocols, but don’t support the FIX or binary protocol, which is the default in the exchanges supporting traditional asset classes such as equities and futures.

With  Apifiny Connect, we want to see the crypto industry move past such technical shortcomings, as well as challenges in the legal and compliance sectors. For example, many exchanges can’t create multiple accounts for traders, which is a major impediment to executing global strategies.

On that note, our status as a fintech startup has kept the Apifiny Connect journey interesting. We don’t have the mega budgets of many big Wall Street firms, so we can’t just throw money at problems. Instead, our mindset is to make the most out of every resource.

While that may appear to be a limitation, it also goes hand in hand with what makes Apifiny’s collaborative environment so rewarding: we can move at crazy speed compared to the big banks. It’s taken us just over a year and a small team to create what would typically be built in three years by 100+ people. That’s amazing and humbling.

We’re proud of what we’ve built with Apifiny Connect

Global going live

With the launch of Apifiny Connect, we’ve stayed true to our vision of “One Account, Global Execution,” delivering industrial-grade ease to institutional crypto investors.Apifiny clients enjoy a  single, streamlined onboarding process. It’s the same with trading—institutional investors no longer need APIs set up with dozens of exchanges. Instead, Apifiny Connect provides one REST/WebSocket API, or  FIX API, that manages the infrastructure for traders, OTC desks, brokers, and market makers. It’s a fast, comprehensive connection that creates an efficient execution platform for our clients.

In addition to helping institutional crypto traders, Apifiny Connect benefits the exchanges we work with by driving unprecedented flow to them. Previously, institutional investors wouldn’t have been able to send their large order volume to most of these crypto exchanges, but because of our model, now they can. As the exchanges’ trading volume goes up, so does their revenue.

The next step for Digital Assets

We’re proud of what we’ve built with Apifiny Connect. However, we hope that Apifiny isn’t the only company making rapid progress with solutions for institutional crypto investors. That’s because it’s not a question of if, but when the digital asset market will mature. Once that happens, institutional trading volume will be drawn en masse into this asset class. As these investors emerge, they’ll require an industrial-grade execution platform like Apifiny Connect for deploying significant crypto investments. The more complementary solutions there are to make it even easier for professional traders to invest in the digital assets space, the better.

We’re confident that Apifiny Connect will be seen as the elite execution platform for institutional investors, just as we’ll be glad to keep improving it together with our customers. We haven’t even scratched the surface of cryptocurrency’s possibilities, even though it has existed as an asset class for over ten years. When it comes to building digital asset services with worldwide impact, we’re just getting started.