In March, ICE Data Services began including crypto-currencies in its consolidated data feed for traditional-world traders.
The data is now “top-of-book” or “level-1” trades, bids and offers from more than 20 crypto exchanges and venues. The firm is working to add “level-2” information, which displays the depth of an order book by venue, so users get a look at all the market activity around a particular crypto currency pair, says Charif Lakchiri, Tokyo-based head of connectivity and feeds for Asia Pacific at ICE Data Services.
“Depth data provides additional information about the liquidity of the individual crypto exchanges, so a trader’s algo could find best execution,” Lakchiri told DigFin.
ICE teamed up with a Mountain View, California-based blockchain developer, Blockstream, for this project, with a revenue split underpinning the deal. For the developer, the ICE partnership lets it commercialize its building a settlement network among crypto exchanges, while ICE leverages Blockstream’s existing connectivity to those venues.
Blockstream will formally launch its network, called Liquid, this month. That is a separate product to its data-feed work with ICE but represents another effort to join up liquidity across the crypto world, while the data feed is bringing price discovery and transparency to brokers and market makers, says Ben Richman, director of data services at Blockstream.
How it happened
ICE Data Services is the rebranded Interactive Data, a financial information vendor that Intercontinental Exchange acquired in 2015 (ICE also owns New York Stock Exchange). It sources real-time market data from about 500 exchanges, interdealer brokers and banks, and recasts it as end-of-day static information and real-time feeds for investors, traders and other participants.
When in 2017 the two Chicago-based commodities exchanges, CME and CBOE, launched Bitcoin futures, ICE wanted to also get a piece of the crypto action, but didn’t want a “me-too” product or another contract that settles in U.S. dollars. Instead it turned to its data services business and decided to add leading crypto-currencies to its consolidated feed.
Traders can use this information to find price discrepancies among crypto exchanges
Blockstream normalizes (standardizes) the data it receives from various venues, sorts them according to their timestamps, and converts everything to FIX messages (FIX is the leading finance industry standard for machine-readable trade messaging).
“Traders can use this information to find price discrepancies among crypto exchanges,” Lakchiri said, adding the feed provides trading desks with reference rates that help them find better spreads, improve execution, and develop arbitrage strategies.
He declined to describe initial sales of the crypto add-on to ICE’s main feed, but says the aggregate trades through Blockstream’s network reaches 70% to 80% of global crypto-exchange average daily volumes.
Samson Mow, chief strategy officer at Blockstream, says the tech company’s new product, Liquid, represents the commercialization of its “sidechain” concept.
Sidechains are blockchains that interact with the main Bitcoin ledger, with a cryptographic one-to-one relationship – in other words, it provides a related space for privately transacting crypto assets, and then putting those trades back onto Bitcoin’s network.
The company’s technologists are Bitcoin developers, and products like Liquid rely on Bitcoin's code. The team is releasing open-source code of its sidechains (the privacy settings of Liquid are proprietary), as well as software for Bitcoin micropayments, non-custodial wallets, and plans for a satellite to enhance blockchain connectivity from space.
There are API's out there, but no standardization
But right now, Blockstream is focusing on deploying Liquid, which will connect 15 crypto exchanges and over-the-counter desks, enabling them to transact value.
“There are APIs out there, but no standardization,” Richman said. “It’s hard for institutional investors to do price discovery.” Liquid will serve the same clientele as ICE Data Services, a match that both parties recognized. Blockstream's existing relationships with exchanges will help ICE Data Services sell data feeds, which in turn will help Blockstream's value-add as it launches Liquid.
For Blockstream, the data feeds and the side-chain settlement software is meant to provide transparency to crypto assets. But Richman says more needs to happen before institutional investors embrace the space: in the U.S., at least, he hopes financial regulators adopt a proactive stance toward crypto; custody solutions need to be found; private-key management needs to be easier.
Most intriguing, he says Blockstream is working on tokenizing a fiat currency, such as U.S. dollars, backed by actual dollars in a bank account, as a way to support Liquid’s settlement mechanism. “We’re working on getting a trusted fiat currency on the blockchain, so transactions can happen in one place,” he said. That would provide institutions with more confidence about crypto-currencies.