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US Investment Giant Charles Schwab Not Interested in Direct Trade of Crypto

Charles Schwab the US-based brokerage giant, which manages over $3.2 trillion in assets, are dismissing cryptocurrencies for the time being. This decision comes in spite of their competitors ‘Fidelity’ rushing to embrace this new market.

According to Rob Farmer, Schwab’s managing director for communications, the firm is not looking to offer direct trading services of cryptocurrencies “at this time.” Farmer further advised, “Investors should view these currencies as a purely speculative instrument.”

The investment powerhouse’s decision to dismiss cryptocurrencies has been met with much criticism. Tim Welsh of the California based consultancy group Nexus believes Schwab’s decision is based on an unwillingness to disturb the status quo. He spoke out claiming that, “Unless Schwab’s biggest advisors demand that they do something, they will continue to sleep-walk through innovation.”

Lex Sokolin — global co-head for financial technology at blockchain software firm ConsenSys — has a far less critical view of the firm’s slow-burning strategy. He believes that ultimately, established investment giants “have the long-term advantage right now, because they can acquire for cheap.”

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Fidelity, Schwab, Citadel Securities Launch New Crypto Exchange EDXM

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Financial heavyweights, including Charles Schwab (SCHW), Citadel Securities, and Fidelity Investments, announced a launch of a new cryptocurrency exchange on Tuesday.

As per the report, the trio has collaborated on launching the cryptocurrency exchange called EDX Markets (EDXM).

The exchange is described to be a first-of-its-kind designed with a promise to offer safer, faster, and more efficient cryptocurrency trading. The exchange aims to eliminate expensive bilateral settlements by netting and settling trades through its blockchain network.

The EDXM’s trading platform will rely on the technology built by The Member Exchange (MEMX), a U.S. stock market owned by a group of financial firms, including some of EDX’s creators. This will enable the EDXM to scale its operation to serve retail and institutional investors in several markets.

The exchange will also be backed by ventures, including Citadel Securities, Paradigm, Sequoia Capital, and Virtu Financial.

Jamil Nazarali, the former global head of business development at Citadel Securities, is assigned to lead the EDXM exchange, serving as the CEO of the platform.

In a statement, EDX Markets’ board of directors said: “Crypto is a $1 trillion global asset class with over 300 million participants and pent-up demand from millions more. Unlocking this demand requires a platform that can meet the needs of both retail traders and institutional investors with high compliance and security standards.”

New-Found Interest in Crypto

Despite the fall of crypto prices this year, institutional interest in the market has remained high as institutions bring in fresh money and more money than retail can pour in. Established asset managers like Abrdn, Charles Schwab, and BlackRock recently took a hard look, seeking to secure a foothold in the market.

Last month, Abrdn, the U.K. investment group, bought a stake in digital assets exchange Archax. BlackRock opened a private trust offering institutional clients in the U.S. direct exposure to Bitcoin. Schwab also launched a crypto-linked exchange-traded fund (ETF).

Last month, South Korean securities companies (including Mirae Asset Securities and Samsung Securities) reportedly focused on the crypto industry, with plans to set up digital asset exchanges in the first half of 2023.

Early this month, SEBA Bank launched Ethereum staking services, an institutional-grade offering enabling clients to earn staking rewards on Ethereum.

Asset managers have become open to multiple futures of finance. They are increasingly embracing cryptocurrency as a legitimate way of hedging sophisticated investors’ portfolios, like other alternative assets such as Gold.

Some brands have circumvented the usual Bitcoin-first route and ventured into non-fungible tokens (NFTs), ETFs, and the metaverse.

EDX Markets Debuts Cryptocurrency Trading Platform and Wraps Up Latest Investment Round

In a key milestone, EDX Markets has successfully kick-started its cryptocurrency trading operations and completed a fresh funding round. Based in Hoboken, New Jersey, EDX has been established as a trusted marketplace for digital assets, promoting safe and compliant trading through reliable intermediaries.

EDX has garnered the attention of major financial institutions, becoming the preferred cryptocurrency marketplace for industry leaders. The platform stands out with its non-custodial model designed to prevent conflicts of interest. It also offers benefits like enhanced liquidity, competitive quotes, and a retail-only quote, giving retail-originated orders a better pricing advantage. Currently, EDX supports the trading of well-known cryptocurrencies (mainly POW), including Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), and Bitcoin Cash (BCH).

Another milestone is on the horizon for EDX. Later this year, it plans to launch a clearinghouse, EDX Clearing, which will settle trades matched on EDX Markets. The clearinghouse will function as a central counterparty for trades, reducing settlement risks, promoting price competition, and increasing operational efficiency.

The launch of EDX and the forthcoming EDX Clearing comes on the heels of a successful new funding round. The round saw participation from strategic investors such as Miami International Holdings, DV Crypto, GTS, GSR Markets LTD, and HRT Technology. These firms join the platform’s founding investors, including heavyweights like Charles Schwab, Citadel Securities, Fidelity Digital AssetsSM, Paradigm, Sequoia Capital, and Virtu Financial. The newly secured funding will bolster the ongoing development of EDX’s trading platform and strengthen its market leadership position.

Jamil Nazarali, CEO of EDX, expressed his confidence in the platform’s potential and its ability to attract investors. He stressed EDX’s commitment to incorporating the best practices from traditional finance into the cryptocurrency market and hinted at the significant edge EDX Clearing will provide by improving competition and operational efficiency.

Schwab Q3 Survey: 44% Bullish on U.S. Stock Market and 66% See AI as a Significant Market Impact

The Charles Schwab Trader Sentiment Survey for Q3 reveals a shift in trader expectations towards a more optimistic view of the market environment. After two consecutive quarters of heightened recession anticipation, the latest survey indicates a brighter outlook among traders.

Key Findings

For the upcoming three months, 44% of traders are bullish about the U.S. stock market, a significant increase from 32% in Q2. Conversely, bearish sentiment has decreased from 52% in Q2 to 35%.
Although 69% of Schwab’s trader clients believe a U.S. recession is likely, this figure has dropped from 86% in Q2 and 87% in Q1. Among those expecting a recession, 64% now forecast its onset in Q4 2023 (26%) or later (38%). This is a notable shift from the previous quarter, where only 19% predicted a recession in the same timeframe.
Primary Concerns Around Investing: Traders have expressed concerns about the potential of a recession (14%), the Federal Reserve raising interest rates (14%), the political landscape in D.C. (13%), inflation (10%), and market corrections (10%).
The survey, which captures the perspectives of traders at Charles Schwab and TD Ameritrade, delves into primary concerns around investing, the likelihood and expected duration of a recession, and economic data influencing outlook. For instance, 77% of traders are influenced by inflation, 63% by consumer spending, and 55% by the labor market.

James Kostulias, head of Trading Services at Charles Schwab, commented on the findings, stating, “While traders certainly don’t feel we’re entirely out of the woods yet when it comes to an economic downturn, we’re seeing an influx of cautious optimism.” He attributed this optimism to a robust jobs market and relatively low unemployment rates. Despite a slight increase in inflation, it remains significantly lower than the highs of 2022.

Demographic Insights

Older traders are more bullish at 49%, compared to 41% for younger traders and 38% for retirees.

51% of traders believe it’s a favorable time to invest in stocks and other equity-based investments, an increase from 41% in Q2. Moreover, 53% feel they are in a better financial position than a year ago, a jump from 36% in the previous quarter.

Sector and Asset Class Perspective

Traders are most bullish on the energy, information technology, and health care sectors. Real estate is the only sector where the majority (54%) are bearish.

On the asset class front, traders show bullishness towards value stocks, domestic stocks, growth stocks, and equities in general.

AI’s Role in Trading

Artificial Intelligence (AI) is gaining traction in traders’ decision-making. 66% of traders believe AI will have a significant impact on the market in the next 1-3 years. Furthermore, 35% are already incorporating a company’s use of AI in their stock analysis, and 51% are bullish on AI stocks for the next quarter.

The Charles Schwab Trader Sentiment Survey is a quarterly study that included 768 Active Trader clients at Charles Schwab and TD Ameritrade, conducted from July 6 – August 3, 2023.