The cryptocurrency still remains a hot topic for discussion among trading platforms
There are several new issues that the trading community has faced in 2018 and cryptocurrency is one of them. Cryptocurrencies have blossomed, and regulators have increased the scrutiny of the products. The SEC (Securities and Exchange Commission) is taking a look at bond platforms, as there are several types of alternatives. Platforms have also attempted to merge in back-tested models to increase trading volume.
While the volume of cryptocurrency trading has dipped in the wake of the collapse of Bitcoin in the Q1 of 2018, regulatory scrutiny has picked up the pace. There are three types of regulatory bodies that focus on cryptocurrencies:
There are also many ways traders are initiating risk in the cryptocurrency world, which has altered many platforms. Futures platforms that added bitcoin futures did not have much to change. Cash cryptocurrency exchanges like Coinbase, needed to undertake substantial changes as initially, they did not have a trading platform. It’s taken most of 2018 for many of the wallets that arrived in early 2018 to come up with a trading platform.
The platforms that had the most success are the platforms that added cryptocurrency CFDs (Contract For Difference). This is a security that tracks the movements of an underlying instrument. A bitcoin CFD tracks the movements of bitcoin and a trader is only responsible for the change in the price. CFDs also provide leverage for cryptocurrency traders. This allows the investor to borrow capital and use that to potentially enhance their returns. Many of the forex brokers that added cryptocurrency CFDs have created a cryptocurrency trading app.
Recently, the US SEC initiated a fact-finding group with some of its regulatory partners to review the rules that are used to track the corporate and municipal bond trading platforms. The SEC is the regulator that oversees fixed income products in the United States.
Currently, the oversight of digital bond trading varies based on the specific business models and trading that is conducted by a company. Unfortunately, it increases risks for investors and also creates systematic risk and lopsided practices. The SEC’s Market Structure Committee is now evaluating the process. There are even specific platforms that are regulated and known as alternative trading platforms. Some are broker/dealers while others are not regulated by any oversight authority.
New trading platforms are providing testing tools which allow investors to post their trading strategies for others to evaluate. These are also linked to brokers where investors can execute trades. The issue is the reliability of the trading strategy which is left to the investor or others in the forum that will vouch for the model. It introduces some market risk as most of these products are black boxes, which means that the investor does not know what is behind the decision making process. New regulations are likely needed to protect investors from black box trading.