Crypto exchanges and retail brokers vie for customers, while the hiring zeal is waned

broker who offer stock trading and crypto exchanges that sell digital tokens make mutual progress among customers when the passion that retail volume has driven on the market.

Both groups that serve normal investors as goals for buying and selling popular assets observe the most attractive areas of their competitors' markets in order to counteract the cooling, which was caused by this year's drops of stock and cryptoma markets.

A strong increase in trade in shares and cryptocurrencies under "Hat-A-GO" investors Last year caused a strong but fleeting boom in broker houses with high trading volumes and record-breaking new customer registrations.

inflation and rising interest rates have steamed the enthusiasm of investors. According to an analysis of broker chooser, the number of trades placed in traditional US brokers broke up by 32 percent in the first quarter of 2022 compared to the previous year.

Supported by the profits from two lively years of the pandemic trade, some crypto companies invest in diversification in new markets.

The crypto exchange FTX will start with stock trading this year and supplemented its strategy by buying the Embed Financial stock-clearing house and an unnecessary participation in the regulated IES stock exchange. Bitpanda, one of the largest stock exchanges in Europe, has already had stocks and ETFs buy.

Sam Bankman-Fried, the 30-year-old founder of FTX, has also seriously thought about an ambitious goal: the purchase of the Memestock broker Robinhood in order to drive his company's push forward, according to the persons familiar with the matter. In May, he paid $ 648 million for a personal participation of 7.6 percent in Robinhood, which was co-founded by the 35-year-old Vlad Tenev. According to FTX, no formal M&A talks were conducted.

"Many people who want to invest in crypto also want to invest in shares.

he said after buying companies that either "strong brands and user bases" or "Many.. Experience with certain license areas in which we do not have so much background knowledge".

On the other hand, retail brokers try to stay competitive and to win new users in a market in which the commissions for trading in shares are zero.

Robinhood began in 2018 with crypto trade, while Interactive Brokers, which handled about 9 percent of the option volume in the USA, announced plans to enter the crypto room. Public.com enables users to act both stocks and crypto.

In May, the Fund Manager Fidelity announced that he would allow investors to include cryptocurrencies in their portfolios in 401 (K) pension plans. In addition to the Market Makers Virtu Financial and Citadel Securities, Fidelity and Charles Schwab are also building a trading platform for cryptocurrencies. "We are spitting out new things very quickly," said Steve Quirk, the new Chief Brokerage Officer at Robinhood.

Managers of retail brokers see an opportunity to enter the cryptoma market before the US legislator defines rules for trading digital assets.

"If the supervisory authorities publish some rules, it will be too late to take part in the right way to take part [Crypto]," said Thomas Peterffy, Chairman of Interactive Brokers. "It is better to be already in the markets and adapt to the regulations..

But both sides face obstacles to achieve the breakthrough on the other's market.

It may not be easy to transfer a technology that was developed for the crypto trade to existing stock platforms. "If companies want to offer crypto now, they have a huge problem. If you build it yourself, you will have a product that is like 2017," said Eric Demuth, co -founder and CEO from Bitpanda.

The market for private tactics in the USA also changes because the economic framework for business models is changing.

The business model of retail brokers is checked by the regulatory authorities, in particular with regard to the practice of payment flow for orders. Brokers such as Schwab and Robinhood sell their customers' orders to intermediaries such as Citadel Securities and Virtu-and they earned more than 3.8 billion US dollars in payments for their orders last year.

ftx has already said that it will not sell its order to market maker if it begins with stock trading and that profitability is not the main concern.

Bankman-Fried argues that the broker industry is ripe for consolidation. "They have thousands of mobile brokers, most of whom do nothing but to provide a mobile app that establishes a connection to payment for the order flow," he said.

At the same time, interest rates have risen to the highest level for more than a decade, which enables brokers to collect interest and achieve income from large accounts. This has contributed to compensating for declines in the case of trading proceeds.

This can favor larger established companies that have a large and established customer base.

"Big brokers where customers have a lot of money, namely Schwab and Interactive Brokers, have considerable sales potential," said Rich Repetto, analyst at Piper Sandler.

More than 45 percent of Schwab's income comes from interest on customer assets, a number that has increased since then because the trade revenue has slowed down. In contrast, according to the data of the first quarter, 73 percent of Robinhood revenue were bound to the trade, and only 18 percent come from interest income on customer accounts.

In order to illustrate the efforts of Robinhood to increase the accounting stands, the group informed the customer in June that they would give them up to $ 800 to transfer their assets to the platform, and to reimburse them up to $ 75 from other brokers.

Although the sales of Robinhood per account has dropped to $ 53 per account, analysts find that it could not be attractive because of its profitability, but rather as a technology company in view of its elegant user experience and its successful onboarding of customers. A large offer can prove to be irresistible.

"If there is a big player that is rich in cash, it jumps into the market.