Building an institutional, cloud-native clearing and settlement platform for a crypto trading venue

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EDX, a digital asset technology firm, launched its flagship marketplace, EDX Markets, in 2023. EDX Markets is a venue designed to emulate the world’s most sophisticated marketplaces, with deep liquidity, firm prices and low trading costs. At the time it launched, EDX Markets relied on bilateral, off-platform post-trade settlement directly between its members.

EDX set out to enhance this marketplace by introducing a central clearinghouse, EDX Clearing (“EDXC”), a unique offering in institutional crypto trading. The clearinghouse would enable all-to-all trading on EDX Markets allowing customers to benefit from liquidity from every participant, reducing settlement risk exposure and ensuring a superior trading experience.

As a lean startup which had previously outsourced much of its technology, EDX faced the challenge of scaling quickly to realize its vision. The firm hence decided to partner with Adaptive, who had the necessary domain and technology expertise to jumpstart the clearinghouse system and deliver a reliable, cutting-edge clearing solution for EDX in less than five months.

Challenge:

  • Building a full-stack, end-to-end clearing and settlement platform from scratch to support EDX’s global client base.
  • Delivering the system within a 20-week timeline.
  • Leveraging the latest cloud technologies for scalability and resiliency.

Solution:

  • Delivering complex functionality through a modern architecture and technology stack running on AWS.
  • Focusing on reusability and componentization to easily integrate with various third-party tools and respond quickly to emerging requirements.
  • Leveraging an agile delivery model to provide a high degree of flexibility and transparency into system design and development.

Outcome:

Drawing on extensive experience in the digital asset space, in fewer than five months Adaptive worked with the EDX team to build:

  • An institutional-grade clearing and settlement solution with unique features, including book and risk management functions at its core.
  • A web-based clearing portal with an intuitive UI that provides reconciliation, reporting and administrative tools to EDX and its members.

Building a clearing solution for digital asset trading

The digital asset industry has faced significant challenges in establishing trust and stability, particularly for institutional investors. High-profile failures have underlined the importance of reliability, regulation and transparency in crypto trading – driving demand for institutional grade digital asset venues and trusted post-trade solutions.

In this environment, EDX set out to launch a central clearinghouse (EDXC) to increase efficiency and reduce risk on its EDX Markets venue.

EDX had a clear vision for EDXC:

  1. Facilitate all-to-all trading, enabling members to access liquidity from every participant, with EDXC acting as their counterparty.
  2. Centralize risk management, safeguarding members by reducing exposure to settlement risk and ensuring timely settlement of all trades daily.
  3. Enable an array of tech-enabled operational and capital efficiencies, simplifying the management and scaling of trading activities for members.
  4. Offer a modern, intuitive UI capable of supporting the needs of EDX personnel and members alike.

The overall aim was to significantly reduce operating expenses and overhead so that members could focus on trading

The brief

EDX had the vision, business acumen and experience to design the clearinghouse, but as a lean startup, it had to scale quickly. Having previously outsourced much of its technology, EDX needed the burst capacity to kickstart the project and ramp up its internal tech team.

EDX also wanted full ownership of the platform and its code post-build – enabling independent management and control over the pace and focus of future innovation.

EDX’s key decision-makers were aware of Adaptive’s capabilities in designing and building high-performance trading solutions, including numerous cloud-based platforms, as well as Adaptive’s extensive experience within digital asset trading. EDX approached Adaptive to partner on the design and build of EDXC and set an aggressive timeline for production deployment.

Project challenges

EDX and Adaptive faced several challenges in the design and buildout of EDXC:

Compressed delivery timeframe:

EDX sought to bring a greenfield clearing platform to market in less than six months. This required a high degree of coordination between EDX stakeholders, the Adaptive team and the in-house development teams focusing on other aspects of the EDX Markets venue. The project also needed a well-managed, transparent delivery model that would enable rapid development and the flexibility to change based on evolving needs and priorities.

Accelerated cloud deployment:

The delivery timeline would also require the rapid creation of a production AWS environment. Experience with all aspects of AWS-based deployments was a critical prerequisite for project success.

Integration with existing marketplace infrastructure:

As EDX Markets’ venue had launched prior to the buildout of EDXC, the new clearing solution would have to easily integrate with the existing marketplace infrastructure and be flexible enough to adapt to any future changes.

“Our collaboration with Adaptive culminated in a state-of-the-art clearing platform that redefines risk management and operational efficiency for institutional crypto markets.”

Tony Acuña-Rohter
EDX Clearing, CEO

The solution

Over the four-and-a-half-month delivery period, Adaptive worked closely with EDX to ensure continuous priority alignment to keep up with the evolving objectives of the project. Adaptive met EDX’s ambitious timeline, leveraging its domain expertise from top to bottom and cloud experience to accelerate deployment further.

The project entailed UX/UI design, front end and back-end development, delivery management and SRE.

Optimized for simplicity and sophistication, EDX now offers a fully integrated marketplace and clearinghouse that addresses members’ trading, clearing and settlement needs.

EDXC streamlines operations through a once-daily net settlement model, boosting efficiency and reducing transaction costs for members. Payments are consolidated and settled at the end of each day,

eliminating the need to send funds multiple times throughout the day. This greatly reduces settlement risk, ensuring trades are never left exposed. Additionally, EDXC’s ability to offer up to 5x leverage on deposits removes the requirement to pre-fund transactions, which is a common challenge on other cryptocurrency platforms. These streamlined processes substantially decrease operating costs and overhead, enabling members to dedicate more attention to core trading activities.

In the first six months after EDXC’s launch in October 2023, the clearinghouse has cleared nearly $17 billion of transactions.

“Adaptive’s expertise in helping accelerate our build of a cloud-native clearing solution with superior risk management and capital efficiency – and its ability to do so in under five months – has been pivotal in establishing EDX as a frontrunner in the new era of institutional crypto trading.”

Tony Acuña-Rohter
EDX Clearing, CEO

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