abrdn led the round as strategic investor, with involvement from other firms including Bitrock Capital, Blockchain Coinvestors, CE Innovation Capital, Keiretsu Capital, Lingfeng Capital, Mathrix AG, SGH Capital and The Tezos Foundation.

Archax is the UK’s first and only digital securities exchange, brokerage and custodian licensed by the FCA. The firm allows institutional investors to custody and trade a wide range of digital assets including digital securities and cryptocurrencies, as well as traditional securities.

Archax has also revealed plans to offer a range of regulated crypto exchange traded products (ETPs) in the near future.

“We are extremely pleased to have been able to complete a round of this size during the turbulent crypto and traditional financial market conditions of the last few months,” said Graham Rodford, chief executive and co-founder of Archax.

“It is also fantastic to have such credible and strategic partner investors involved in the raise too – led by abrdn. We look forward to the next phase of the Archax journey as we scale up for launch and beyond with these partnerships in place.”

Earlier this year, Archax concluded a deal with abrdn, making it the largest external shareholder of the exchange. By investing into Archax, abrdn will offer investors access to the venue as a route to acquire new investment opportunities through digital securities. 

“The digital assets ecosystem continues to grow at pace, and Archax’s success in this latest funding round underlines the appetite there is among investors to partner with organisations at the forefront of that shift,” said Russel Barlow, global head of alternatives at abrdn.

“As momentum builds, Archax, and abrdn, are well placed to take advantage and meet growing client interest in digital assets that can be accessed through digital exchanges.”

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Best Challenger Exchange is a new category for Leaders in Trading this year, in which we recognise not only the ever-changing facets of the marketplace but also the plethora of new venues springing up to accommodate them.

Unsurprisingly, given the themes of 2022, digital assets did a lot of the heavy lifting in this year’s shortlist – but it’s not all about crypto, with US-based players such as MEMX driving themes of equality and investor power, while IEX is of course well-known for its stance on high frequency trading. Our shortlist this year includes Archax, FTX, Investors Exchange (IEX), Members Exchange (MEMX) and Miami International Securities Exchange (MIAX).

Archax 

A new institutional-grade exchange for trading crypto/digital assets founded in 2018, Archax is the first crypto firm to be regulated by the FCA. With a majority stake acquired by abrdn in August 2022, the trading venue is clawing its way into institutional inner circles, most recently through its new partnership with METACO to deploy its digital asset custody and orchestration technology on IBM Cloud, in order to leverage the confidential computing capabilities of IBM’s digital asset infrastructure.  

A digital asset exchange, brokerage and custodian based in London, Archax has big ambitions. “We see the digital asset market as a long-term investment opportunity, and at Archax we make investments in technology and processes to reflect that vision,” says CEO and co-founder Graham Rodford.  

But it is also expanding outwards from pure crypto trading into the wider world of what blockchain can offer. In September, the firm partnered with BondEvalue to deliver solutions for the trading of fractional fixed income products. The partnership will enable their clients to access investment opportunities on BondEvalue’s regulated platform, the BondbloX Bond Exchange (BBX), a blockchain-based bond exchange which allows investors to conduct electronic trading of fractional bonds. 

As a bridge between the traditional and DLT space, Archax is proving a worthy contender.  

FTX  

A cryptocurrency exchange built “by traders, for traders,” FTX Trading offers products including derivatives, options, volatility products and leveraged tokens. With a senior team comprising alumnis from Jane Street, Optiver, Susquehanna, Facebook and Google, among others, the exchange seeks to service everyone from both professional firms to first-time investors, with a platform that is both simple and sophisticated.  

At the start of 2022, FTX Trading won a further $400 million in Series C funding, taking its total valuation to $32 billion – not bad for a firm only founded in May 2019, with investors including Singapore’s Temasek and Paradigm. In March of this year, the exchange expanded its presence into Europe and the Middle East with the establishment of FTX Europe, marking the next phase of its global expansion. Headquartered in Switzerland with an additional regional headquarter in Cyprus, the new company offers its products and services to European clients via a licensed investment firm with passportable licenses across the European economic area. 

In the same month, the firm partnered with US-based crypto platform West Realm Shires Services to launch a new unit targeted at institutional investors – marking its commitment towards developing and supporting institutional involvement in crypto trading. FTX Access will initially provide institutional investors interested in gaining exposure to digital assets with trade execution, analytics, index products, advisory services  and capital introductions, with plans to expand into custody, derivatives, structured products and other asset management products later down the line. 

“Our goal is to provide services that make it easier for traders at all levels to invest in cryptocurrencies, while also meeting compliance and regulatory standards found in traditional finance,” said FTX CEO and co-founder Sam Bankman-Fried, speaking at the time.  

FTX also this year made a strategic investment into IEX Group, the operator of the US-based Investors’ Exchange, in order to develop a transparent market structure for the buying, selling and trading of digital asset securities.  The question of crypto regulation has long been a tricky one, and FTX US has been clear about its ambitions to become a regulated exchange, working with regulators to create a platform that enables both retail and institutional engagement with digital assets.   

Investor’s Exchange (IEX) 

A controversial name on the exchange landscape, IEX has created some waves in recent years, but there is no question of its influence. Founded in 2012 with the intention of mitigating the impact of high frequency trading, and listing in 2017, the exchange is familiar to many as the brainchild of ex-RBC traders Brad Katsuyama and Ronan Ryan, who came to believe that that traditional stock exchanges were enabling certain trading strategies that could harm long-term investors such as mutual funds and pension funds. Debuting as a dark pool in 2013 and the subject of Michael Lewis’ notorious book Flash Boys, the exchange has since built a name for itself through its mission to give all market participants a fair and efficient trading experience.  

It has developed a number of innovations including the IEX Speed Bump, designed to ensure that the exchange executes trades at the most up-to-date price, and the IEX Signal (i.e., Crumbling Quote Indicator or CQI), a machine learning-based signal that aims to protect investors from trading while prices are unstable. Since its inception, more than $8.5 trillion in shares traded on IEX Exchange have benefited from the IEX Signal. 

Members Exchange (MEMX) 

Claiming to be the fastest-growing US equities exchange, MEMX was founded by its own members to serve as a co-operative, collective exchange acting in the interests of its founders and their client base. Its founding members include many of the largest US retail broker-dealers, global banks, financial services firms and global market makers, such as Bank of America Merrill Lynch, Charles Schwab, Citadel Securities, E*TRADE, Fidelity Investments, Morgan Stanley, TD Ameritrade, UBS and Virtu Financial. The exchange’s mission is to “increase competition, improve operational transparency, reduce fixed costs, and simplify the execution of equity trading,” and it has grown rapidly since its launch in 2020, currently accounting for around 5% of equity market share.  

Its big development this year was the launch of its US options exchange, and in August the SEC issued approval for it to trade listed options. “MEMX Options will use technological advancements to increase determinism, reduce costs and drive competitive improvements for our options members, just as we did in equities,” said Jonathan Kellner, chief executive of MEMX.  

“As the only exchange founded to represent the needs of market participants, expanding into a new asset class allows us to provide meaningful benefits to an even broader range of investors.” 

Miami International Securities Exchange (MIAX) 

MIAX operates regulated financial marketplaces across multiple asset classes and geographies. The MIAX Exchange marketplaces are enabled by in-house built, proprietary technology that was originally built to meet the high-performance quoting demands of the US options trading industry. 

The group operates markets across a number of asset classes including options, futures and cash equities: including options through MIAX Options, MIAX Pearl, and MIAX Emerald; US equities through MIAX Pearl Equities; US futures and options on futures through the Minneapolis Grain Exchange; and international listings through The Bermuda Stock Exchange. Through MGEX Clearing, it also offers clearing services for US futures and options on futures. The group recently acquired Dorman Trading, a full-service Futures Commission Merchant registered with the Commodity Futures Trading Commission.

Its total US multi-listed options market share reached a record 14.3% in 2021, a 21% increase from its 11.8% market share in 2020. Total US multi-listed options market share for the MIAX Exchange Group reached 11.63% in the first nine months of 2022, representing a 19.8% year-over-year decrease. A total of 97.3 million multi-listed options contracts were executed on the MIAX Exchange Group, representing an average daily volume of 4,635,039 contracts. Total year-to-date (YTD) volume reached 961.2 million contracts, a decrease of 2.8% from the same period in 2021.

In US equities, MIAX Pearl Equities reported volume of 2.8 billion shares in September 2022, representing a 101.8% increase YoY and a record monthly market share of 1.16%. Total YTD volume reached a record 22.4 billion shares, a 268.1% increase from the same period in 2021. Since launching its first options exchange in 2012, MIAX has grown to be the 15th largest global derivatives exchange operator as of 30 June 2022, as measured by the total number of futures and options contracts traded on exchanges as reported by the Futures Industry Association.

Since 2017, MIAX has been involved in ongoing litigation with Nasdaq, surrounding six claims of patent infringement. As of June 2022, these claims were invalidated by the US District Court and and Nasdaq waived its right to appeal, thus closing the case. 

The winner of Best Challenger Exchange will be announced at the Leaders in Trading 2022 gala awards dinner at The Savoy Hotel on 3 November. For table enquiries, please contact Nathan Anacleto.  

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Established four years ago, Archax provides institutional investors with access to blockchain-based digital assets, serving as a bridge to traditional capital markets. Set to launch later this year, it is the first digital securities exchange to win approval from the Financial Conduct Authority (FCA), with permissions covering trading, custody and brokerage.

“Blockchain technologies are inevitably going to form a big part of the future of financial markets. There is the potential to offer greater transparency, greater speed and less trading friction by using these nascent digital technologies,” said Stephan Bird, chief executive of abrdn.

“With Archax, we will have a meaningful footprint in this fast-developing market – which is likely to evolve in a multitude of different ways that are relevant to our core businesses. This investment not only provides an opportunity for substantial financial benefits, it also creates a partnership with some of the leading thinkers in an area that has the potential to play a substantial role in the future of finance.”

By investing into Archax, abrdn will offer investors access to the venue as a route to acquire new investment opportunities through digital securities. It will also bring the investment manager new connections to existing offerings through tokenisation, alongside improving operating efficiencies through the adoption of new technologies such as blockchain. 

“We see this [investment] as a massive statement of belief in what we have built at Archax, as well as being a key milestone in our evolution and for the digital/tokenised world as a whole,” said Graham Rodford, chief executive of Archax.

“We look forward to working with abrdn closely to provide a new universe of users with access to our services, as well as creating new innovative tokenised products that will trade on our marketplace.”

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Institutional digital securities exchange Archax has appointed a new head of institutional sales, Malcolm Ford, ahead of its official launch later this year.

Ford joins Archax as head of institutional sales with over 20 years of industry experience in electronic trading, most recently serving as a sales consultant at CMC Markets for the last five years.

Prior to CMC Markets, he was head of strategic broker-dealer sales at Instinet Europe for a year, and a director, responsible for driving electronic revenue, at KCG Europe. 

Previously in his career, Ford also served as an executive director for electronic trading at investment bank Morgan Stanley for two years, and as a senior sales manager at Credit Agricole Cheuvreux for over ten years.

“For the next phase of the Archax journey, we need to ramp up our interaction with the traditional institutional community, as we roll out digital asset solutions that are directly aimed to serve their needs,” said Graham Rodford, chief executive officer of Archax. 

“Malcolm brings extensive experience and connections from that world, and has the proven skillset needed to drive forward our growth in that space.”

His appointment follows the news in October that the crypto exchange, which covers a range of digital assets had exceeded its initial funding target by $3 million, reaching $8 million in total.

Archax also became the first and only crypto exchange to receive approval from the Financial Conduct Authority (FCA) in August last year, adding that this approval had been essential to securing its funding.

“The explosion of activity in the crypto space is highlighting the requirement for institutions to look for trusted partners in the digital asset world,” added Ford. “As the first and only FCA-regulated digital securities exchange, Archax is in the enviable position of helping institutions unlock this fast-developing market.”

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The crypto venue said it has raised a total of $8 million to date after a recent funding round, with the most recent venture capitalist firms to invest including Alameda Research, Amnis Ventures, Bridgetower Capital, CoinFund, Edge196, Hudson Capital, QBN Capital, and 7percent Ventures. 

Archax had originally been targeting $5 million to support its launch, but the firm extended the seed raise allowing it to exceed the target. The Institutional digital asset exchange operator said that its recent approval from the Financial Conduct Authority (FCA) had been essential to securing its funding.

“Getting our FCA regulation in place and building the exchange platform were huge first milestones for us. But we obviously also needed the funding in place to meet our regulatory capital requirements to launch,” said Archax chief executive, Graham Rodford. “To successfully close our seed raise, and beat our target in the process, was amazing – even more so when you consider the calibre of the VCs who have invested in us.”  

Archax became the first FCA regulated digital securities exchange after receiving crypto asset registration from the UK watchdog in August earlier this year. The move meant that for the first-time digital issuances globally will be able to trade on an FCA authorised secondary market and institutions will have access to a regulated digital securities venue.

“It is our belief that the license from the FCA provides confidence and safety to Archax’s investors. Having closed the seed round above target, Archax is ready for a successful launch,” commented Hudson Capital chief executive, Warren Wang. “We are committed to further supporting Archax in building a worldwide ecosystem of next-generation digital assets under their FCA regulation.”

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The move means that for the first-time digital issuances globally will be able to trade on an FCA authorised secondary market and institutions will have access to a regulated digital securities venue.

“Blockchain and tokenisation are innovations that can empower more frictionless and transparent markets which, combined with an FCA regulated exchange like Archax, can deliver what capital providers, business leaders, and founders now really need,” said chief strategy officer at of the London Stock Exchange and non-executive director at Archax David Lester. “The launch of the Archax exchange will help bring the institutional and digital asset communities closer together, and open up a new era for the global financial markets space.”

Archax can now provide primary market channels for capital rising and a secondary market for digital instruments to trade as an SME Growth Market.

The authorisation covers Multilateral Trading Facility (MTF), CASS custody, and brokerage permissions.

“We have been talking to the FCA for a while and the application process has been a tough journey, but we are pleased to have now achieved our first significant milestone as we prepare to launch the UK’s first FCA regulated digital securities exchange later this year,” added Archax chief executive Graham Rodford. “Our technology partners are second to none, we have a pipeline of 35 digital issuances in place, and we are signing up global brokers and market makers ready for go-live. This is an exciting moment for Archax and a great step in the evolution and legitimacy of digital securities globally.”

In July, Archax confirmed it was set to provide a secondary market for security tokens issued on the Globocap platform.

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Speaking to The TRADE Crypto, Lester explained that traditional financial institutions are seeking exchanges with cryptocurrency offerings that allow firms to do things the way they are used to with a trusted third-party. 

“Some of the larger entities are looking at this space quite hard and I can’t imagine that there is any institution out there that isn’t at least carrying out some sort of study or investigative report into how they can get involved in crypto in a secure way,” he told The TRADE Crypto.

“Some are further along than others, but slowly there is a critical mass evolving which will only get bigger. The timing is good, but these things always take a little longer than people think.”

Lester recently made headlines after backing a cryptocurrency exchange startup as an advisor and non-executive director following 16 years with the London Stock Exchange leading major acquisitions such as index provider FTSE International and Turquoise.

Led by former senior executives at hedge fund Omni Partners, Archax is looking to launch its institutional-grade cryptocurrency exchange by the end of the first quarter next year. The startup has already received a seed investment from digital currency fund, Alphabit, as it aims to become the first established, global, institutional, digital asset trading hub. 

“For the past seven or eight years at the LSEG I was primarily driving the M&A there, which involves finding the companies, bringing them into the Group and so on,” Lester added. 

“I would say the reason I’ve decided to be involved with Archax is because of it’s a similar spirited type of innovation in London that wants to embrace this emerging world and asset class… For the next five years, I envision [Archax] will be similar to a multilateral trading facility (MTF), alongside a set of token rules and reporting obligations.”

For the full interview with Lester, Graham Rodford, CEO at Archax, and Matthew Pollard, CFO at Archax, please click here.

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A London-based cryptocurrency exchange targeting institutional investors has been backed by the former chief strategy officer at the London Stock Exchange Group (LSEG).

David Lester has joined Archax as an advisor and non-executive director, as the startup launches its institutional-grade digital asset exchange for both traditional and emerging institutional players. 

Institutional investors globally have so far taken a ‘wait-and-see’ approach to cryptocurrency trading, due to overwhelming concerns around regulation, custody, liquidity and volatility. 

The Archax exchange has been designed to legitimise the new marketplace for those institutions, using existing exchange infrastructure and a hosted datacentre. It will operate under regulatory and best practice principles in a bid to provide transparency for clients.

Graham Rodford, chief executive at Archax, explained that the current digital asset world is just the beginning, and the firm expects to increasingly see opportunities emerge as the world realises that “all assets can be tokenised”. 

“As this occurs, institutions will be looking for a way to realise their investment strategies in both new and traditional ways,” he said. “We have assembled a seasoned team and advisory board who understand the needs of institutions and who are used to operating in a highly regulated world – people from hedge funds, brokers, banks, exchanges, vendors and the academic space.”

Lester, who departed the LSEG in June last year after 16 years with the exchange operator, added that blockchain and tokenisation are innovations that have significant potential to disrupt and open up new business opportunities.

“Tokens can turn networks into markets, blockchains can enable more frictionless and transparent marketplaces.,” he commented. “How this evolves is of real interest to capital providers, business leaders and founders.

“I am pleased to be an advisor to Archax, a strong team of likeminded individuals whose mission is to bring global institutional capital to the crypto asset space, which will underpin and accelerate its adoption.”

The crypto exchange has already received a seed investment from digital currency fund, Alphabit. Archax concluded that by bringing in further interest, liquidity and investment from the institutional space, the startup exchange will look to become the established global, institutional, digital asset trading hub.

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