AAX, a Hong Kong-based cryptocurrency exchange that uses the London Stock Exchange (LSE)'s matching engine technology, has officially launched.
After 19 months of development and testing, the company said on Thursday that the exchange platform has gone live on web and mobile, targeting retail and institutional investors with spot, futures and over-the-counter peer-to-peer trading.
The LSE said previously that AAX would be the first crypto exchange to utilize its Millennium Exchange matching engine. Other major equity markets like the London one itself and the Hong Kong Stock Exchange also uses trading platform tech from the LSE.
In addition to crypto-to-crypto spot trading, AAX expects the derivatives market to be a major focus with its offering of perpetual contract futures settled in bitcoin. These contracts, which have no expiration date, will be tied to the performance of five digital assets – bitcoin, ether, ripple, litecoin, and EOS – with up to 100 times leverage.
AAX claims that with the LSE's matching engine, it can settle futures trades at an average speed of less than 0.0005 seconds. To put that in perspective, Binance advertises a low-latency settlement of 0.005 seconds for all its current and upcoming products on Binance Futures.
“LSEG Technology is delighted to have successfully deployed our world class matching engine capabilities at AAX. This is the first time that Millennium Exchange has been deployed in the cloud, bringing its, scalability, flexibility, reliability and seamless direct market access to AAX,” LSEG Technology's CIO Ann Neidenbach was quoted as saying in a statement.
Thor Chan, CEO of AAX, told CoinDesk that the firm started in March 2018 without raising money from external investors, using its own capital to support a now 100-person team, of which 60 percent are developers.
The exchange will take a hybrid approach to the custody of customers' digital assets, combining its own in-house storage solution and third-party institutional custodians.
Chan said he believes the partnership with the LSE will expedite the process of on-boarding institutional clients especially from the traditional financial sector for AAX's spot and futures services.
He added that working work with the LSE will allow AAX to gain access to the stock exchange's exclusive partner network that consists of over 300 major banks and financial institutions.
Michael Wong, COO of AAX, told CoinDesk:
Earlier this year, Intercontinental Exchange, the parent company of the New York Stock Exchange, launched Bakkt, a long-awaited market for physically-settled bitcoin futures targeted at institutions. Chan said Bakk'ts tiered system, which requires registered brokers to serve as middlemen, could be a hurdle to widening its client base.
That is where he believes AAX has an edge.
"It's different. Bakkt has physically delivered contracts. So they need to have a broker network to help do the settlement. It's actually a barrier for them to acquire users," Chan said.
On the retail side, AAX uses a similar strategy to exchanges like Huobi or OKEx by enabling peer-to-peer OTC trading as a fiat on-ramp supporting Chinese yuan, U.S. dollars and Hong Kong dollars.
"For us, we don't provide any fiat deposit or withdrawal methods for the users," Chan said. "We are not allowed to take deposits or withdrawal from mainland China. That's not compliant to do so. But if it's just a peer-to-peer deal, it's something allowed in mainland China."
AAX's launch comes just a day after the Hong Kong Securities and Futures Commission (SFC) released a warning on exchanges that offer cryptocurrency futures trading in Hong Kong.
Companies or individuals who offer crypto futures contracts without a proper license or authorization may be considered as breaching the regulation in the city depending on the product structure, the SFC said, adding:
"Any person who operates a platform that offers or trades 'futures contracts' is required to be licensed or authorized under the SFO unless an exemption applies."
The SFC has not licensed or authorized any person in Hong Kong to offer crypto futures and added given the risks associated with this type of products, it "would be unlikely to grant a license or authorization to carry on a business in such contracts.
In a response to the SFC's latest warning, the company said:
Thor Chan image courtesy of AAX
CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk offers all employees above a certain salary threshold, including journalists, stock options in Bullish Group as part of their compensation.