AAX Exchange: A secure and trusted market environment will promote the development of incremental markets

On September 16, the Beta version of AAX (Atom Asset Exchange), the world's first digital asset trading platform driven by the London Stock Exchange Group (LSEG), was launched.

Following the launch of the Beta version, AAX was featured as a key partner at Blockchain Live London, Europe’s largest blockchain industry conference, on September 25. AAX Chief Commercial Officer Michael Wong attended and delivered a speech entitled “Cryptocurrency and Digital Asset Exchanges: A New Era”.

Michael said in his keynote speech that after the cold winter of digital currency last year, the digital currency market is booming with the recovery and strengthening of market confidence, the continuous increase in trading volume, and the diversification of investor types. However, if we want to unleash the greater potential of digital currency, we must promote dialogue between the decentralized community and the regulated investment community, and create a suitable market environment within a safe and reliable framework so that investors can freely choose their own risk preferences. He believes that such an environment is likely to attract not only mainstream players but also large amounts of capital into the digital currency market. If the market continues to be allowed to run its course, market manipulation and other unscrupulous practices will become more unscrupulous, which will inevitably cause serious damage to smaller investors, and the consequence may be to drag down or even block the growth of this emerging market.

AAX believes that exchanges play a very important role in this regard, because it is exchanges that provide investors with a platform to guide capital to the most promising blockchain projects and companies. In order to prevent capital from being misdirected, it is particularly important to provide a fair trading environment that is free from market manipulation.

Michael pointed out that institutional investors currently hope that the trading environment of the digital currency exchanges they use can be similar to traditional exchanges such as NASDAQ or LSE, because they are familiar with such systems. They also need to ensure that the platform is secure enough, without market manipulation or malicious trading, and that the platform reaches institutional level in terms of performance, with ultra-low latency processing of order requests, sufficient liquidity and massive trading volume, etc. As the participation of institutional investors continues to increase, an increasingly mature market is coming. In the face of the ever-changing market environment, trading platforms need to hold themselves to higher standards, ensure compliance, superior performance, and meet the needs of institutional entry.

According to Michael, AAX uses the world-leading matching engine technology of the London Stock Exchange Group, which can ensure ultra-low latency while also carrying extremely high throughput. In addition, AAX uses the compliance technology and operating methods of the London Stock Exchange Group, which can provide a fully regulated, ultra-low latency trading platform capable of handling deep liquidity and institutional-level trading volume. At AAX, both institutional and individual investors can experience a smooth, reliable and secure trading experience that is comparable to the world's top stock exchanges.

On the day of the event, AAX also held a VIP high-end lunch, inviting more than 50 top investors from the blockchain, banking, fintech and other industries to have lunch together, and had in-depth discussions and explanations on the concept of AAX as "the world's first digital asset trading platform driven by London Stock Exchange Group technology" and its unique cooperative relationship with London Stock Exchange Group.

The following is a translation of the speech:

I am very happy to be in London, UK today to participate in the Blockchain Live blockchain event. London is a special place for the AAX team. This city is the home of the London Stock Exchange and the city that provides technology to AAX. In fact, AAX is the world's first and only digital asset exchange powered by the London Stock Exchange Group's trading engine.

As we all know, the cryptocurrency industry is undergoing tremendous changes every moment: at this stage, government agencies are exploring the regulation of Bitcoin, institutional investors are showing great interest, and large companies like Facebook hope to bring cryptocurrency to the masses.

At the same time, we can also see that traditional financial giants have shown great interest in digital currencies, and even produced many blockbuster results, such as: New York Stock Exchange and Bakkt, London Stock Exchange and AAX, JPMorgan Chase and JPM COIN, etc.

Deepening of the cryptocurrency market

So far, the crypto market has only been developing for ten years. But it was not until recent years that cryptocurrencies showed characteristics that were different from other products, and this phenomenon of returns was also recognized by more and more investors, making cryptocurrencies a "niche product". In the past few years, we can clearly see that the interest and participation of institutional investors and mainstream participants have continued to increase.

For example, R3CEV attracted 42 giant banks to participate in the launch of the distributed ledger platform Corda, IBM's super ledger project Hyperledger, Fidelity Investments established a digital asset service company in October 2018, JPMorgan Chase released its own blockchain product JPM Coin in February 2019, and the recently popular Facebook's Libra has been supported by traditional financial giants Visa, Mastercard and PayPal.

I believe that since Bitcoin reached its all-time high at the end of 2017, the market has moved from frenzy to stability and then to maturity. As an early adopter of Bitcoin, if I say that we have not even begun to tap the full potential of this new asset class, most digital currency enthusiasts will agree with this view. However, the entry of institutional users will inevitably accelerate the release of the potential of cryptocurrencies, because where institutional users are, that is where the capital is, and to put it bluntly, that is where the money is.

As the interest of institutional users in the cryptocurrency market increases, the attention of regulators is also increasing. This poses a contradiction: how to achieve a balance between "protection" and "innovation"?

International organizations and governments are taking action

We all know that regulators are concerned about the risks to investors, concerns about security, and control over the country's monetary policy. At the same time, they also need to prevent cryptocurrencies from becoming a tool for buying drugs, laundering money, and financing terrorism. In response to these challenges, international organizations and governments are also actively developing effective regulatory frameworks.

The IMF, known as the "lender of last resort", can be seen as the manager of the global monetary system. The IMF told central banks and economic policymakers around the world that countries need to prepare for the regulation of digital currencies and take regulatory measures to establish protection mechanisms while encouraging innovation. However, the interaction between digital currencies and new currencies, as well as banks that issue legal tender, has raised concerns about financial stability and consumer protection. In addition, the IMF also warned that alternative forms of foreign exchange, finance and value may have an impact on financial integrity, monetary policy and capital flows.

The Financial Action Task Force (FATF), an intergovernmental organization dedicated to combating money laundering and terrorist financing, completed its regulatory recommendations for cryptocurrencies in June this year. The FATF's cryptocurrency regulatory standards include a controversial requirement that "virtual asset service providers" (VASPs), including cryptocurrency exchanges, must pass customer information to each other when transferring funds between companies. Although its guidance is not legally binding, at the G20 summit in July 2018, countries decided to manage crypto assets in accordance with FATF standards.

In July this year, the UK Financial Conduct Authority (FCA) has also developed final guidelines for the regulation of crypto assets. The FCA classifies cryptocurrencies such as Bitcoin and Ethereum as "Exchange tokens", which are not regulated but are subject to anti-money laundering rules. Importantly, the guidelines classify the issuance of security tokens as similar to the issuance of stocks, debt instruments and ownership, and should be classified as "specific investment products" and fall under the jurisdiction of the FCA. The most controversial move by the FCA is the proposal to ban retail investors from trading cryptocurrency derivatives, including options, futures, contracts for difference (CFDs) and exchange-traded notes (ETNs), such as (unregulated) crypto assets with Bitcoin as the underlying.

The EU's Anti-Money Laundering Directive (AMLD5) specifically stipulates that EU member states should prevent money laundering and other illegal activities conducted through digital currencies. In order to avoid any illegal money transactions using digital currencies, AMLD5 extends its scope to cryptocurrency transactions and wallet platforms.

As soon as Facebook's cryptocurrency plan was announced, it immediately caused a lot of controversy. The US Congress held several hearings on Facebook's Libra project. "The US government is studying Libra very carefully. It must comply with US anti-money laundering standards to survive, even if its headquarters is in Switzerland." This statement came from the US Treasury's Under Secretary for Terrorism and Financial Intelligence. He further stated that no matter where Libra chooses to register, it must comply with US standards if they hope to continue to operate.

Just got the news that in the past two days, the People's Bank of China has clearly stated that "accelerating the pace of research and development of the national legal digital currency (DC/EP)" is one of the key tasks in the second half of 2019. I think this is on the one hand to respond to the challenge of Libra, and on the other hand to protect the country's existing monetary policy. If everything goes well, the digital currency supported by the Chinese government may be officially released earlier than the Libra coin in the United States.

Policies and markets are changing, and the AAX platform is also keeping pace with the times

To meet these needs, we are also seeing more attempts, for example, collaboration between cryptocurrency exchanges and traditional financial giants.

1. Bakkt, backed by Intercontinental Exchange, the parent company of the New York Stock Exchange

2. ErisX, a crypto spot exchange supported by Nasdaq investment

3. AAX, the technology-driven asset trading platform of London Stock Exchange Group

As a digital currency exchange backed by a traditional financial giant, AAX has launched the following services based on the philosophy of trust, integrity, security and performance:

•Over-the-counter, currency-to-currency and contract trading of digital assets;

•100x ​​leveraged contracts/futures trading can help users obtain maximum profits;

• Multiple channels such as browsers, iOS, Android APP and API application programming interfaces ensure that users can trade digital assets anytime and anywhere;

•Trade in the integrated AAX exchange account to meet the needs of different trading strategies.

For more service experiences, please visit the official website (www.axx.com). AAX exchange is currently in the beta testing phase, and the official version will be launched in the fourth quarter, and more activities will be launched at that time, so stay tuned!

AAX trading platform, with its powerful technology drive, can meet users' requirements for performance and capacity to the greatest extent. AAX creatively introduced the trading technology of London Stock Exchange Group MillenniumIT, which has been widely recognized by the market in the traditional financial field. According to the existing data, MillenniumIT has carried out multi-faceted cooperation with more than 40 organizations and traditional stock exchanges, including the London Stock Exchange, Hong Kong Stock Exchange, Singapore and Johannesburg stock exchanges that are familiar to the public. MillenniumIT transaction matching engine can achieve high concurrency, low latency, high stability, and can carry the transaction volume from the world's largest traditional financial market.

AAX uses a dual verification of risk verification and KYC certification. The first layer of defense of AAX is to attract the right customers. For example, AAX does not allow citizens or residents on the OFAC sanctioned country list and citizens or residents of EU and UN sanctioned countries to use our platform.

The second layer involves traditional customer due diligence practices to understand the true identity of the user. In addition to requiring customers to provide identification documents, additional background checks will be conducted on customers. We use solutions provided by Refinitiv to screen global regulatory and law enforcement lists. All of these measures are to protect the legitimacy of the platform and ensure that traders on AAX do not have bad backgrounds.

AAX decided to host its matching engine in the cloud. This is the best option to optimize performance and meet the needs of institutional investors. Operators who host their exchanges in the cloud can choose from a wider range of products, including storage, security, content delivery, development tools, server options, etc., so they can quickly adapt to meet a range of possible outcomes. In addition, setting up infrastructure in the cloud is also very fast, usually in just one day.

In addition, the latency of cloud services is also very low. AAX's data on latency can be disclosed to everyone here: as low as 90 microseconds, the median value is 250 microseconds, and the highest value is 839 microseconds. This means that we can provide a trading experience equivalent to traditional financial markets.

In terms of flexibility and scalability, AAX servers are deployed on the AWS cloud, and any regulatory agency can easily access and inspect the servers regularly. In the event of an emergency, remote operations to transfer to a different availability zone in the cloud only take a few hours, while the process of transferring a traditional data center to another location may take weeks or even months.

Security is a top concern for exchanges, and AAX is no exception. AAX has a high level of security systems in place, and in terms of protecting the safety of customer assets, AAX actively complies with the Cryptocurrency Security Standard (CCSS), a recognized security standard for cryptocurrency systems, including security measures for any system used to store, process or accept digital assets.

AAX's multi-currency wallet system is developed independently by AAX. The system complies with industry standards, has multi-signature features, and has no single point of failure. It does not rely on a single security source and has a strong recovery protocol. In addition, AAX is equipped with a hardware security module (HSM) to protect the end-user private keys used to co-sign transactions.

For asset security, most of AAX's digital assets are stored in offline storage with cross-level industry standard encryption technology, and sensitive data on the server is completely disconnected from the Internet. Insured crypto custody can also be provided in fully regulated entities upon user request. AAX has invited Kroll, a risk solution provider that serves well-known teams such as the Hong Kong Police Force and JPMorgan Chase Bank, as a security consultant.

We will continue to work towards the goal of building an institutional-level trading platform for users, helping investors create a trustworthy, regulatory-compliant, and highly liquid trading environment, ensuring that users can trade with peace of mind anytime, anywhere.

As an important partner of Blockchain Live London, I am very happy to share with you my views on the future of the cryptocurrency market. Thank you for your attention! We will also hold a VIP luncheon at noon and hope to have in-depth exchanges with you.

*This article is adapted from the English speech given by AAX Chief Commercial Officer Michael Wong at Blockchain Live London on September 25.

About AAX Exchange

AAX is an institutional-level platform that supports individual and institutional investors to buy, sell and store digital currencies such as Bitcoin, Ethereum, Litecoin, Ripple, and digital currency futures trading.

About Michael Wong

Michael is the CSO (Chief Commercial Officer) of AAX Exchange, and has 18 years of experience in system architecture, financial platforms and blockchain technology. He is responsible for shaping AAX's global technology strategy, partnerships and architecture to ensure that it builds innovative institutional-level solutions.