Swiss securities giant SIX Group is leading a $14 million series A investment into Omniex, an enterprise infrastructure provider building investing tools for institutional investors.
SIX had previously revealed an investment in Omniex, but the Series A announced today also includes investors Jump Capital, Wicklow Capital and Sierra Capital. While the valuation of Omniex isn’t being disclosed, SIX says it acquired a 12% stake in the company and a seat on the board of directors for it’s share in the round. A previous seed round of $10 million, brings the total amount raised $24 million. Omniex expects it will have a runway of “multiple years” based on the amount raised.
Launched in August 2017, Omniex is a technology company based in San Francisco that provides a tech stack to connect customers to aggregated asset pools at some of the largest exchanges in the world, including Binance, BitMEX, and Coinbase Pro, making it easier for institutions to make crypto deals most individuals wouldn’t be able to afford. Instead of “swiveling from screen to screen to screen to screen to figure out your position and try to do a trade,” as Omniex co-founder and CEO Hu Liang puts it, the company brings it all to a single location.
While Omniex plans to use the funds to build out its portfolio of institutional bitcoin investing tools, SIX is much more than just a strategic investor. Rather, SIX plans to use Omniex to connect its private banking customers to a wide array of digital asset investment opportunities.
“Going after the institutional space is quite different than going after the retail market where you can create a lot of things that hadn’t been done yet and be able to get to the client easily,” says Liang, who previously worked for 16 years at holding giant State Street. “Here, we’ve always said that we need to build a platform that looks and feels familiar to institutional investors, and we’re going to continue to put that infrastructure in place to reduce the fragmentation.”
Omniex has been operational since Q3 2018, providing aggregated liquidity from 15 exchanges, also including Bittrex, Bitfinex, BitStamp, Gemini, Kraken, itBit and Poloniex. Omniex selects its exchange partners to provide institutions a variety of investment opportunities from spot trade to unregulated derivatives, using a total of nine algorithms to identify investing opportunities. Included in the strategy are passive algorithms designed to protect investors from market conditions; benchmark algorithms looking to achieve volume or time-base objectives; and situational algorithms like the “iceberg algorithm” designed to mask large trades and minimize market impact.
In total, algorithm usage on large bitcoin purchases has increased in the last three months from 34% of the overall volume to 76%, showing what Liang believes is an increased desire for more sophisticated trade executions. “We focus on geographical differences, so the clients can have their choice,” he says. “Because we’re not a counterparty, it doesn’t matter to us.”
Existing clients include Polychain Capital, Blocktower Capital, Hyperium Decimus, Ledger Prime and Taurus Group. An early customer of Omniex, ARCA, confirmed it is no longer working with the exchange, but didn’t provide additional information as to why. While Omniex isn’t sharing revenue, Liang says the company has grown its total transaction volume by 581% from Q4 2019 to Q1 2020, but isn’t yet profitable.
Among Omniex’s newest customers is SIX Group, this round’s lead investor. Zurich-based SIX Group runs a massive portion of Switzerland’s financial infrastructure, from the SIX Swiss Exchange for stocks, to the central counterparty SIX X-clear and SIX Trade Repository, similar to the Depository Trust and Clearing Corporation (DTCC) in the U.S. Collectively, these products and others give SIX what its head of securities and exchanges, Thomas Zeeb, calls, a “value chain from trading, all the way through, clearing and down to settlement.” SIX’s most recent financial filings show it generated about $3 billion profit in 2018.
Now, after a delay that would have seen the new SIX Digital Exchange (SDX) for listing, trading, settling and custodying crypto-assets, launch last year, the parent company will use the Omniex liquidity services to connect its existing clients, especially banks, to massive pools of bitcoin scattered across the partner exchanges, Zeeb says. “Once the market and the regulators are ready, we will be moving from the existing infrastructure, tokenizing existing shares and bonds and stuff that we have in the central depository today in the traditional market into the new markets,” he says, including tokenized stakes in fine art and real-estate.
“Because you have SDX set up as a single entity that will allow you to go from trading all the way through to settlement in custody, you don’t have the various interfaces and breaks that you have with existing traditional platforms,” says Zeeb. “I fully expect that 10 years down the road we will move from the traditional structures into the digital structure.” SDX is scheduled to launch later this year.