[noname123]

How does your accumulate and distribute algo's work? Is it a VWAP, TWAP order? Basically slice-and-dice a hidden iceberg when there's volume on one side of the book that you're trying to trade for?

Also curious how you guys market make on BTC, are the prices you are showing as the other exchanges the asking price, and you guys are essentially tightening the spread? Or are you guys selling parts of bulk orders of the large sell orders directly? How do you hedge your inventory risk?

[akbar123]

Great questions.

We offer both options, VWAP and TWAP.

The price on other exchange is based on Google's price of BTC.

We do not market make ourselves. We make it easy for market makers to market make.

Our price advantage you see on the site is based on routing. Different exchanges have price advantage at different times and so we route to the exchange that has the best rate; including splitting your order if needed.

We currently don't show the price advantage of algorithms (very difficult to show without knowing trade parameters).

We do not take any inventory risk.

noname123, is there a way for us to connect. You clearly have experience in the space. We would like to speak with you in more details.

[noname123]

Hi akbar123, thank you for being transparent. Unfortunately, I don't think I can contribute that much to your project as my experience is in options trading not at all familiar with the BTC market.

There was one time when I did look into arbitrage across different BTC exchanges, the issue I saw then (which I'm not sure still stands) is that different BTC exchanges had different processing fees that made it prohibitively expensive to arbitrage in practice. For instance, Mt.Gox or something similar had like a 0.15% cash out fee. Not to mention foreign exchange risk if you move money in and out of European exchanges vs. US exchanges.

BitInstant was created I believe to solve this problem, http://en.wikipedia.org/wiki/BitInstant ; by parking money at all of the available exchanges and charging an interest for people to access their funds for arbitrage. They were shut down due to being deemed as a money transmitter operating without license by the New York state financial regulators.

I do think there might be an opportunity for people who trade the US and European BTC market and arbitraging the USD/Euro exchange rate.

Fr example, bitcoin.de has a best bid of 443 euro (or equivalent of 594.13 USD) of almost 3 lots; bitstamp has a best ask of 8 lots at 582.43. If you parked sufficient funds at both exchanges, you can buy at market price at bitstamp 3 lots and sell at market the 3 lots to bitcoin.de, and immediately buy a hedge of USD to Euro by shorting a equivalent dollar amount of the Euro ETF, FXE. Of course, in practice this is difficult to carry out as you have to factor in slippage, commission cost and how exact your hedge is.

Anyways, that's my $0.02; gl.

[akbar123]

Thanks.

We considered adding arb option but after running simulations and accounting for fees and slippage, the opportunity was very small. We also didn't find a suitable hedge to minimize our risk.

We have considered adding option trading; however, given the drop in volume in btc trading, we wonder if there is enough demand for option trading. If others request it, we are happy to build it.

Happy to brainstorm with you if you are up for it. Email added to my profile.