Shanny Basar talks to Jenna Wright, Managing Director at LMAX Digital, about launching the crypto business in 2018, increasing institutional interest and rapid growth.
LMAX Digital, the institutional spot cryptocurrency exchange that is part of global financial technology provider LMAX Group, will celebrate its fourth anniversary in May 2002. Back in 2017 Jenna Wright, Managing Director at LMAX Digital, had a baby and was considering her return to work after eight years at LMAX Group.
The group is present in foreign exchange markets around the world, including Europe, North America and Asia-Pacific and services funds, banks, asset managers and retail brokerages in more than 100 countries. Businesses also include LMAX Exchange, which operates global institutional FX venues and an FCA regulated MTF; and LMAX Global, a regulated broker for global FX, metals and commodities.
Wright returned to LMAX Group in early 2018 after CEO David Mercer mentioned that clients were pushing the firm to enter crypto because they wanted institutional grade infrastructure which it already provided in foreign exchange. Wright started to buy bitcoin and Mercer asked her to come back and launch LMAX Digital and she went through almost the same processes as in 2010 when launching the FX exchange, including obtaining regulatory approval and building out policies and procedures.
“We are still only four years in and the crypto industry is accelerating at light speed,” she adds. “One year in crypto is the equivalent of 10 years in traditional finance as things move so fast.”
Her role at LMAX Digital involves day-to-day management of the business and making sure everything works including liquidity provision, custody, and new and existing clients. She gets out on the road as much as she can to crypto events and makes that fit around having two young children
“LMAX Digital was very similar and used the same software as we had in FX,” she adds. “For us, crypto is really just another currency.”
One of the differences is regulation. LMAX approached the UK Financial Conduct Authority and the regulator asked to be kept updated about what the crypto business was doing. LMAX Digital chose Gibraltar for regulation because of the jurisdiction’s crypto framework and similarity to FCA regulation. Another difference is custody where LMAX relies on banks in the FX market. After doing a lot of research on crypto custodians LMAX decided to offer custody themselves.
“In the last six months there has been more institutional business than ever from crypto-native funds and family offices,” Wright adds. “It is an educational process and we play an important part in the thought leadership approach.”
She believes the next three to five-year phase will see real institutional adoption as some of the roadblocks, especially in regulation, are being addressed and the crypto ecosystem is coming together. Many banks already take LMAX’s crypto market data, and the business is in conversations so they will be ready when there is a green light around regulation.
“Once traditional custodians come into the crypto market the asset will go mainstream with larger funds, which will be very exciting and skyrocket this asset class,” she says.
The business faces competition from crypto-native exchanges but Wright said that LMAX’s focus is on being an exchange operator, which is very different to other crypto venues.
“We are all about low latency and 100% uptime and we have been doing that for 13 years,” she adds. “Our niche is providing institutional grade infrastructure which will not change.”
In July 2021 LMAX Group reported record results for the six months ended 30 June, which included LMAX Digital volumes increasing nine-fold to a record of more than $300bn with more than 500 institutional investors actively trading. In the same month LMAX Group announced the sale of a 30% stake in the company to J.C. Flowers & Co., the private investment firm. The $300m transaction valued LMAX Group at $1bn.
Wright hopes that in another four years LMAX Digital will have full-scale institutional adoption.
“We will start to see Tier 1 banks and traditional funds trading and we will have expanded our products,” she adds. “This year we will be moving into derivatives and adding a few more coins that are liquid.”
On 17 March 2022, LMAX Group announced that it has partnered with Swiss and Spanish financial market infrastructure provider SIX to launch cash-settled, centrally cleared crypto-asset futures in the third quarter of this year, pending regulatory approval. The launch will initially include centrally cleared US dollar settled Bitcoin and Ethereum futures, trading 23 hours, five days a week, with the full product roll out to be extended to 24/7 trading.
Mercer said in a statement: “Our global institutional client base, including 35 top tier banks already trading with LMAX Group, will benefit from the strength of our proven and tested exchange trading technology, combined with the secure clearing connectivity of SIX. The crypto futures market is three times bigger than spot and by offering access to deep institutional liquidity, we are providing a significant market entry opportunity as crypto and blockchain finance evolves.”
Wright started working on the sports side of an American broker-dealer after graduating from Economics and Politics at The University of Manchester but found that it was not the finance angle that she had been looking for. She described the LMAX opportunity as more tailored to what she wanted.
“The firm also had a startup mentality which meant my role was very open as I worked on getting the exchange started and on FCA approval,” she says.
She has been promoted throughout her career at LMAX which she described as “really important” because supporting young female leaders is key to getting the gender balance right, especially in a young company. Her advice to women who want to work in crypto is to go for it and take risks. She continued that in crypto there are really young smart kids, both male and female, coming up the ranks and there are a lot of opportunities in crypto, probably more than in other capital markets.
“Every company is not going to be around but find the right firm and a job that you believe in and give it a go, because that’s the only way to do well,” says Wright. “If you are always excited to be part of something that has done so well in a short amount of time, that is a real driver.”
She puts her success down to really enjoying her opportunities and having a good team that has really supported her from day one.
“I am very busy with two young kids but I wouldn’t have it any other way,” says Wright. “This is the most exciting time in my career and I am learning every day. The potential of crypto really excites me.”