How A Prime Dealer Can Help You Navigate Crypto Exchanges in the United States

When it comes to trading in any asset class, you’re only as good a trader as your chosen trading venue allows you to be. That’s doubly true in the world of crypto, where history and recent events have shown over and over again that crypto exchanges vary hugely in quality, compliance, and reliability.

Especially when it comes to crypto exchanges in the United States, it’s a critical yet challenging task for traders and institutions to choose the right trading and asset management venue where they can count not only on accessing the tools they need for their workflows, but also on the exchange still being open for business tomorrow. If you’re trying to navigate these challenges for yourself as you choose a crypto exchange for your U.S. operations, you may want to consider doing business with a prime dealer rather than directly trading on exchanges and OTC desks. In a recent AMA for crypto prime dealer sFOX, Head of Product Jackson Finio and Head of Operations & Treasurer Daniel Hinton walked attendees through the ways a prime dealer can help them develop a more dependable asset management system in the nuanced and volatile world of crypto. Watch the VOD below, and read on to learn how sFOX’s combination of centralized, integrated trade management and robust prime services form the basis of a different, more professional crypto experience in the United States.

What is a Prime Dealer, and Why Trade with One vs. a Crypto Exchange in the United States?

While many view decentralization as one of the crypto sector’s core value propositions, there are benefits to opting for centralization when it comes to choosing a trading venue. A prime dealer like sFOX provides a single, compliant, US-based platform that connects traders to all major crypto liquidity from one account with an integrated order book. As Jack points out, the centralized nature of sFOX affords better incentive alignment between traders and their trading venue, while also providing them with superior risk management:

Unlike OTC trading, [at sFOX], we’re not trading against our clients. We’re simply routing out the order to destination venues. Plus, this mitigates our clients’ counterparty risk because you don’t have to hold assets with each exchange or OTC venue or worry about settlement. It’s all centralized.

sFOX maintains its own funds with the liquidity providers to which it is connected and acts as the direct counterparty for its clients’ trades, routing their orders to connected liquidity providers and trading on their behalf. This is a major source of risk mitigation in a sector where individual crypto exchanges in the U.S. may be unreliable as counterparties: beyond just routing orders to destination venues, sFOX actively monitors the health of the liquidity providers to which it is connected, dynamically updating their integrated order book and making sure that clients’ orders get reliably executed, leveraging degrees of freedom to trade execution that are unavailable when trading directly with any single liquidity provider. As Daniel points out, sFOX’s prime dealer model also means that a client “[doesn’t] have to wait for the trade to execute and then settle back to sFOX. You can withdraw immediately after the trade because we are the counterparty. 

So, let’s say you bought one Bitcoin that executed across 10 different exchanges and venues. We are settling that trade to your account immediately at that point. […] And, of course, there’s on-chain processing time, but generally, most withdrawal requests are processed within 10-15 minutes, depending on on-chain activity. The funds are immediately available.

Individual crypto exchanges risk introducing operational volatility to your trading strategy, whether that’s due to venue downtime, a lapse in their regulatory standards, or security shortcomings. A prime dealer like sFOX provides a suite of algorithmic order types to ensure that your orders get executed on your terms no matter how many liquidity providers are required, but its value is far greater than a trading platform: as Daniel says, “we like to think about being on our clients’ team as well.” sFOX brings together an industry-leading team of engineers, traders, and lawyers to constantly evaluate the performance and compliance of the liquidity providers connected to the platform, giving clients not only a single point of access to the crypto market, but also peace of mind that they are trading as efficiently as possible comfortably within the rails of U.S. regulations.

How a Prime Dealer Improves Your Workflows with Prime Services Unavailable through U.S. Crypto Exchanges

The “prime” in ‘prime dealer’ stands for the plethora of prime services that a company like sFOX provides its clients, creating a centralized offering that allows traders to manage their crypto workflows more efficiently and holistically than is possible when transacting directly with a single U.S. crypto exchange. These services espouse sFOX’s philosophy of providing an extension of their clients’ in-house teams: more than providing any particular product or service, a prime dealer provides a deep and qualified community of experts working to help asset managers beat their goals—daily, quarterly, and beyond.

The newest key highlight in sFOX’s prime service suite is sFOX SAFE: an institutional crypto custody solution offered in partnership with SAFE Trust Company, the first digital-asset-only trust company regulated by the Wyoming Division of Banking in the United States. SAFE provides users with full, legal ownership of their custodied assets, ensuring that those assets remain safely theirs even in the unlikely event of SAFE Trust Company’s bankruptcy. sFOX SAFE also exemplifies how the unified user experience made possible by a prime dealer can materially improve the workflows of crypto trading and asset management: whereas most custody solutions take time to transfer funds to an exchange and make them available for trading, sFOX SAFE allows your funds in custody to be traded through sFOX’s platform instantaneously. Most custody solutions are also costly and unwieldy, whereas sFOX SAFE is free for all users with up to $250,000 in assets under custody.

Jack notes that this sort of service is the kind of solution that the industry needs at this moment in 2023, especially in the wake of issues that some U.S. crypto exchanges and other service providers have recently faced:

I think it’s the perfect time and important for the industry to seek a higher level of security in the management of client assets. With sFOX SAFE, client assets are entirely protected from the health of the sFOX business overall. You still get the same end-to-end user experience where your assets are available, and you can easily trade and engage in the space yourself.

Separately managed accounts, bespoke transaction reports, and customized workflow automation rules for account management round out the prime services available through sFOX, but the real measure of a prime dealer is in the level of personal care they’re able to give their clients—succeeding as a company by empowering their clients to outperform their own expectations. As Daniel says, sFOX is in a strong position to offer its clients a range of operational and performance insights they’d never expect to get from working directly with a U.S. crypto exchange:

Whether it’s a security audit, a post-trade analytics session where we can review your trading style and the execution algorithms you’re using, or ensuring you’re getting the most out of the platform, we can offer those value-add tools and services as a firm to our clients. So, for any clients who haven’t taken advantage of these services, I recommend reaching out to us so we can set up a time for our team to go over these things with you. […]

We can also optimize your trading after the fact by reviewing things with you. It’s pretty flexible, and we’re happy to work with clients to meet their needs. These are great points, especially when it comes to collaborating on different platforms. However, with all the services in the crypto space nowadays, it can be tough to count on all your accounts being equally accessible or easy to integrate with each other.

“Exchange” Your Current U.S. Crypto Services with a Prime Dealer

Especially in a nascent and fragmented asset class like crypto, it’s easy for service providers to come and go—but when you’re trying to capture real value by trading that asset class, you need to be able to count on infrastructure that’s reliable, built to be compliant and to outlast any shifting trends in the industry. In the world of crypto exchanges navigating the sometimes choppy waters of U.S. investment, there’s plenty to recommend a prime dealer as that extra level of performant stability between your strategy and direct liquidity providers worldwide.

sFOX has been steadfastly setting the standard for a prime dealer’s role in crypto asset management since 2014, and we’re looking forward to helping our clients chart the next decade of growth in the sector and beyond. If you’d like to learn more about how we can help you make your specific goals a reality, we encourage you to set up a time with one of our specialists and find out what it’d be like for us to be a part of your team.

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