GoDark, an institutional dark pool purpose-built for digital assets and backed by crypto custody and trading specialists like Copper and GSR, is unveiling a new service designed to execute large orders without tipping a hand to the market.
As well as GSR and Copper, the offering comes out the gates with heavyweight backing in the form of users such as: FRNT Financial (FRNT), Stillman Digital — a company owned by DeFi Technologies Inc. (DEFT), Fasanara Capital, Capital Union Bank, Tyr Capital, Hercle, Valos and Trillion Digital.
Over half of U.S. equities trading volume is conducted in dark pools for a simple reason: If large institutions want to acquire or liquidate a potentially price-moving volume of a certain asset, they don’t want to tip their hand and spook the market. That’s where dark pools come into play, balancing the liquidity available on centralized exchanges (CEX) with the privacy inherent in over-the-counter (OTC) transactions.
As it currently stands, that sort of infrastructure is an order of magnitude more sophisticated than that which exists in crypto, said Denis Dariotis, founder and CEO of GoQuant, the firm that built the GoDark service.
“There is no real institutional dark pool in crypto,” Dariotis said in an interview. “There are DEX’s [decentralized exchanges], there are centralized exchanges, there are OTC desks, but there is no real platform where you can trade off chain while getting the benefits of trading the actual underlying spot asset.”
The advantage of using a CEX, which is fully transparent and could inadvertently move the market, is the large amount of liquidity. An OTC desk, meanwhile, is opaque, but limiting liquidity translates into marked up spreads and high fees. Dark pools sit in between, offering the best of both worlds.
Applying the dark pool concept to crypto is particulaly relevant because of the high volatility of digital assets and the nature of distributed liquidity across different crypto trading venues, Dariotis added.
GoQuant started out as a market data provider for mid-to-high frequency crypto native funds. From there, Dariotis and team created an end-to-end trading system that included market data and trade execution, with latency as a main priority.
As well as the GoDark service, Dariotis recently introduced GoCredit, a borrow/lend platform featuring a centralized matching interface, designed to cater to banks, TradFi hedge funds and similar businesses.
GoDark said it will offer spot cryptocurrency trading at launch and plans to expand into perpetual futures, conventional futures, options and other instruments.
In addition to ultra-low-latency matching and non-custodial settlement, GoDark promises execution protections, including minimum fill sizes and the option to require that orders execute only if they match the best price available on various “lit” venues, something akin to respecting the National Best Bid and Offer (NBBO) in U.S. equities.