In the crypto market, central limit order books (Clobs) operated by centralised exchanges such as Binance have been the main home of retail and wholesale spot liquidity. These are all-to-all models where anyone can be a buyer or seller to the market based on the aggregated market price at any given time of day, with the exchange acting as custodian.
For regulatory and risk management reasons, however, these exchanges are not suitable for most traditional finance (TradFi) participants, and those that are in the space typically trade spot crypto over the counter. But bilateral OTC trading can be time consuming when setting up relationships, and going via brokers can be expensive. Meanwhile, market participants must bilaterally settle trades with each counterparty.
This article originally appeared on Risk.net. Read the full story here.
