Hidden Road, a cryptocurrency brokerage and credit network for institutions, has entered into a partnership with Enclave Markets, a fully encrypted exchange that allows participants to confidentially trade blocks of digital assets. This partnership offers institutions a secure and anonymous trading environment, similar to a dark pool in traditional markets.
Front-running of trades is an acute problem in crypto, which features unique issues like maximal extracted value (MEV), said Michael Higgins, Global Head of Business Development at Hidden Road in a statement. Enclave’s novel, albeit familiar, approach offers Hidden Road counterparties a secure, anonymous and streamlined option for trading digital assets.
Enclave’s Fully Encrypted Exchange, or FEX, uses a pricing oracle to establish a midpoint price for an asset, averaged across various trading venues. When a user logs on, funds an account and submits an order, they only need the size and direction of the proposed trade; they don’t need to put in the price. The partnership with Hidden Road further assures institutions since trading and settlement of assets is done directly from custody, with the added buying power of a credit line that’s typically offered by prime brokers.
Traditional institutions don’t want to integrate directly with exchanges, send their funds and have that counterparty risk, said Enclave Markets CEO David Wells in an interview with journalists. An API call allows you to submit your order to the Enclave marketplace liquidity pool. We then match that order and report that trade back to Hidden Road, who do all the settlement and clearing on their side, netting those trades out against other trades done that day in different venues.
As well as integrating with Hidden Road’s network of custodians, Enclave is also partnering directly with custody platforms, including BitGo, Wells pointed out. Hidden Road, which raised $50 million last year from big players like Citadel Securities and Coinbase, has been busy adding partners in bid to build more grown-up crypto trading infrastructure.