Zero Hash Guest Blog: True Capital Efficiency Realized
Best execution can be achieved with the right combination of execution technology and settlement services.
The digital asset liquidity eco-system is fragmented and settlement remains the top issue among counterparties. By combining Gold-i’s Crypto Switch 2.0 matching technology with Zero Hash’s automated settlement offering, participants and liquidity providers can achieve much increased capital efficiency and reduced operational overhead.
In fact, Zero Hash has been built from the ground up to maximize for capital efficiency. Zero Hash is unparalleled in terms of the fiat rails we offer our customers with 30+ different fiat currencies and two dozen digital asset pairs. Combining that with supported digital assets and Zero Hash is able to offer settlement for over 1000+ asset pairs. Full list of assets supported can be found here.
Automated Settlement to improve pricing from liquidity providers
In short, Zero Hash automates the entire settlement infrastructure removing manual bi-lateral settlement. Zero Hash charges basis points on notional settlement through our system, which more than pays for itself given the improved cost of execution and reduced operational overhead. The price and operational efficiency benefits are achieved because of the following:
(1) The Advantages of Netting
Netting across counter-parties provides simplified operational processes (allowing platforms to scale the number of counterparts without increasing costs of additional operations team) and significant capital efficiency which together allows them to take on more counter-parties. For example:
- Client buys 2 BTC from LP1
- Client sells 1 BTC to LP2
- Client sells 1 BTC to LP3
In this simple example, settlement will require 1 wire and 2 crypto deposits. Through netting, we reduce the operational burden. Here, the platform is net flat and there is no need to wire or send any crypto deposits. In any case, Zero Hash will always provide net position across counter-parties and thus the maximum number of wires is 1 and maximum number of crypto deposits is 1.
(2) Dynamic rebalancing across counter-parties
Leveraging Zero Hash will allow for dynamic allocation of money and crypto to different counterparties in real time. Re-allocating money and crypto from one counterparty to another takes a lot of time and operational effort (especially with time zones and some fiat such as JPY settling t+2).
- Sometimes counterparties are exposed to the following situations:
They are forced to knowingly take a worse price if they run out of credit but need to trade.
- They will naturally receive worse pricing once the other side knows they are approaching their credit limit and time to deliver becomes an issue.
Many Supported Tradable Pairs
Over 1000 tradable pairs allows Zero Hash to provide a complete post-trade settlement infrastructure to over a dozen platforms, including some of the largest OTC and ECNs in the world. Similar to how Banking-as-a-Services developed for traditional services, Zero Hash’s mission is to empower innovators by delivering immediate access to the financial system 2.0. With a couple of lines of code, developers are able to access thousands of tradable pairs in a fully regulated eco-system. Zero Hash offers a truly turnkey and customizable approach to settlement.
About the author:
Adam Leaman, Chief Client Officer, Zero Hash
About Zero Hash
Zero Hash’s mission is to empower innovators by delivering access to the financial system 2.0. Zero Hash enables developers and businesses to focus on building experiences and products. We power your favorite brokerage app or neo bank to offer BTC, provide the rails to the 2.0 payment processors, give platforms the ability to facilitate instantaneous cross border payments and eliminate complexity for moving assets for the world’s largest liquidity providers.
Zero Hash is a FinCen-registered Money Service Business as well as a regulated Money Transmitter that can operate in more than 40 states (providing coverage to roughly 95% of the US population). Zero Hash also holds a virtual currency license from NYDFS.
In 2019, Zero Hash was voted Innovator of the Year by the Profit & Loss Readers Choice Awards.
Gold-i has become a renowned market leader helping financial markets to operate more effectively. Gold-i specialises in helping brokers grow and drive profitability as well as cutting costs and reducing risk.
About Crypto Switch™
Gold-i Crypto Switch™ is an advanced platform allowing brokers, crypto exchanges, liquidity providers and market makers to maximise opportunities from the increasing demand for Cryptocurrency trading. Hedge Crypto flow with multiple leading counterparties and benefit from deeper and tighter liquidity that is centrally settled daily by Zero#.