'Cryptocurrency trading business is clear growth area'

Jane Street, which executed its first cryptocurrency trade in 2017, provides liquidity for a range of digital assets from Bitcoin to Ethereum.

Jane Street is one of the market makers that power Robinhood Markets Inc. customers’ free crypto trades. (REUTERS)

Wall Street firm Jane Street, known for its dominance in established financial markets such as exchange-traded funds and corporate bonds, is becoming a major player in a fast-growing field: cryptocurrency trading.  The New-York based company, which executed its first crypto trade in 2017, provides liquidity for a range of digital assets from Bitcoin and Ethereum to some of the meme coins popular on social media. It is one of the market makers that power Robinhood Markets Inc. customers' free crypto trades. It's also exploring working with emerging platforms, such as decentralized finance exchanges, a crypto Wild West where computer codes known as smart contracts provide quotes and execute trades automatically on blockchain. 

Crypto trading has been “a clear growth area” in the past 16 months, said Turner Batty, a trader at Jane Street who helped start the desk. The number of people at Jane Street working on cryptocurrency has “never been higher,” he said. Now, dozens of employees globally have jobs focusing on crypto trading or have some part of their work, such as tax and accounting, that's related to digital coins. 

The expansion comes as a growing class of Wall Street trading houses muscle into cryptocurrencies, where their quantitative approach find new use in a nascent, fragmented market full of volatility and inefficiencies. Market makers buy and sell assets for their counter-parties, taking advantage of price differences.

Some of Jane Street's rivals, including Jump Trading, Susquehanna International Group and Hudson River Trading, have also been active in crypto in the past few years. They're facing off against digital asset-only firms such as Alameda Research, founded by Jane Street alum Sam Bankman-Fried, a 29-year-old billionaire who also created the leading cryptocurrency exchange FTX.  

Even Citadel Securities, whose billionaire founder Ken Griffin has been a crypto skeptic, is seen as a potential entrant after it recently received a $1.15 billion investment from Silicon Valley investors with digital assets expertise. 

Jane Street declined to comment on its crypto-trading volumes and revenue. As a market maker, the firm takes risk on its books but doesn't have a long-term view on crypto valuations. 

The recent meltdown in crypto prices hasn't deterred institutional interests.

“In terms of demand, we're seeing inquiries from a breadth of institutions. Asset managers, endowments, and private wealth institutions do not want to be caught off guard” if the U.S. regulatory climate changes and they can increase their exposure, said Mina Nguyen, head of institutional strategy at Jane Street. “Sovereign wealth funds are asking questions” about direct digital asset exposure. 

While trading volumes have declined during the downturn, Jane Street has supported counter-parties making new investments.

“There aren't really examples where we've started having conversations with people and then they no longer seem interested,” Batty said.