Cryptocurrency exchanges are tightening regulations on brokerages that bundle clients’ orders to take advantage of discounted VIP trading fees. OKX, the second-largest exchange, recently sent a letter to prime brokers requesting more information about subaccounts, including details about the entities or individuals controlling each subaccount and their location. Failure to provide this information by July 17 could result in restricted trading or subaccount closure.
This move comes after Binance, a larger rival of OKX, made changes to its Link Plus interface to close a loophole that allowed prime brokers to offer rebates to clients through a multitiered fee system. The goal of these changes is to ensure compliance and create a level playing field for all users, whether they access the exchange directly or through an intermediary.
Exchanges offer discounted trading fees to their largest customers to incentivize them to remain loyal. Prime brokerages, which provide trading services to professional investors, could potentially funnel multiple customers’ trades through a single account to qualify for these lower fees. By cracking down on this practice, exchanges aim to price clients separately and prevent brokers from taking advantage of the system.
Bybit, another major crypto exchange, is closely monitoring these developments but has no plans to change its fee structure. The firm remains committed to compliance and the best interests of its users, according to Eugene Cheung, Bybit’s head of institutions.
It’s important to note that CoinDesk, the source of this information, is an award-winning media outlet covering the cryptocurrency industry. Their journalists adhere to strict editorial policies to ensure accuracy and independence. In November 2023, CoinDesk was acquired by the Bullish group, which owns Bullish, a regulated digital assets exchange. Both companies have interests in various blockchain and digital asset businesses, including significant holdings of digital assets like bitcoin. CoinDesk operates independently with an editorial committee to safeguard journalistic integrity, and employees, including journalists, may receive options in the Bullish group as part of their compensation.
Overall, the regulatory crackdown on crypto trading is expanding to major exchanges like OKX and Binance, as they seek to prevent misuse of VIP trading fee discounts by brokerages. This move towards greater transparency and compliance is intended to create a fairer trading environment for all users in the cryptocurrency market.
