The crypto universe has so far been more of a retail-focused trading ecosystem.
But, if Stephen Ehrlich has his druthers, that will change – and soon. In an exclusive conversation with Traders Magazine, Ehrlich outlined his vision for his new institutional cryptocurrency trading platform, Voyager Institutional, which he plans to launch via his new and licensed crypto-asset broker Voyager Digital Holdings Inc. (Voyager) that provides investors with a turnkey solution to trade crypto assets.
Based on the sheer number of conversations since we announced our retail offering Voyager this summer, its clear that there is a void in the marketplace and an immediate desire by institutions to participate in and offer their clients access to this emerging asset class without the significant resources, costs and time that would be required to develop an in-house solution, Ehrlich told Traders Magazine. Weve noted that institutional investors wanted to be able to connect to the Voyager infrastructure by writing directly to its APIs, thereby enabling them to offer crypto trading to their clients while maintaining their existing user interfaces.
Voyager initially planned to launch a commission-free mobile trading application for retail investors in Q4 2018 that delivers best execution in 15 currencies via smart order routing technology. However, based on significant feedback and interest from the institutional community they decided to fast-track their plans to also bring an institutional offering to market.
Voyager Institutional will focus solely on delivering a best-in-class crypto trading solution to traditional buy-side firms, hedge funds, brokerages and market makers, among other professional investors. The institutional product roll-out is also expected to commence in Q4 2018.
And Ehrlich knows Wall Street and trading. He began in the industry circa the 1980s as a CPA right on New York Citys famed Broadway. He then made the transition to financial services and entered the equities trading space in 1994 for TIR Securities and rose to be the firms US based Chief Financial Officer and Compliance Officer. From there he moved to E-Trade and entered the world of electronic brokerage and sales trading.
We went from a phone-based desk with just an Instinet green screen or calling down on the floor and our future – the electronic age – and we all learned on the fly, Ehrlich remembered. We became the brokerage people within E-Trade because they had a lot of technology folks in place already. My boss was Jarrett Lillian and he took the role as chief brokerage officer and I was there with him doing all the M&A and brokerage strategy for about five years. Ehrlich, with his management, subsequently brought the day trading arm from E-Trade and renamed it Lightspeed Financial.
At Lightspeed, Ehrlich, as CEO, ran the firms direct access business – building his desk and executing upwards of 450,000 trades per day when he left in 2012.
Back then there was a lot of business to be done, he said. We were focused on active traders, people who were trying to make money in the market and knew how to short the market. A lot of that business was retail, but we had some institutional business. We were singularly focused in this area because we knew that automated trading was going to be the direction the world headed.
After a brief hiatus from the market, Ehrlich returned to the brokerage world surfacing at API brokerage Tradier. After learning more about APIs and building apps, he met with Oscar Salazar and Phillip Etan, and after careful examination of the marketplace and the needs and opportunities, they set out to build their own trading app and for a new asset class.
The existing crypto trading market structure reminded me of the ECN/ATS world in the late 90s and I immediately thought that we could build a dynamic, smart order router to bring actual value back to customers and provide them with a fast, efficient and transparent way to engage in crypto trading, he added, we looked at what had been accomplished in the equity and option arenas 20 years ago and knew that we could bring this same level of automation to the crypto world.
So, Voyager was born. And now the firm is taking it to another level and getting ready to onboard institutional traders.
We are entering the market and offering our entire back-end services and our APIs to clients who have the distribution whether it’s institutional or retail, Ehrlich said. We have the banking, custody, execution and exchange relationships and have built this entire ecosystem around it. Now institutions have a sophisticated and dynamic crypto offering to they can bring to their customers.
Voyager Institutional has been in beta testing with 15 currencies and the plan is to eventually expand to the top 30 cryptocurrencies based on volume. Ehrlich added that the key to a currency being on the platform was liquidity – and not just at one exchange but at multiple venues. For example, coins that see 90% of their volume trade on a single exchange wont be on Voyager Institutional.
Ehrlich added that institutional traders will more than likely execute orders via the firms APIs and their existing order management systems – where the buy-side is most comfortable – rather than use Voyagers trading app. To that end, he has been hitting the bricks and building relationships with the OMS vendors, liquidity providers and the exchanges.
Our view is that there’s approximately 50 million online brokerage accounts in the U.S., of which three million have crypto wallet exposure, he said. There is an incredible opportunity to deliver a product to market participants that will help them trade crypto assets with confidence and help level the playing field.