A UK trading platform is launching a crypto exchange pitched at banks and hedge funds

• LMAX Exchange, which operates a foreign exchange trading venue, is launching a cryptocurrency exchange.
• The exchange is pitched at institutional investors and LMAX said it is a response to client demand.
• Banks and hedge funds will be able to buy and sell bitcoin, ether, litecoin, ripple, and bitcoin cash.

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LONDON - UK foreign exchange trading venue LMAX Exchange is launching a cryptocurrency exchange for institutional investors.

LMAX said it developed the new "LMAX Digital" venue at the request of clients who wanted access to cryptocurrencies like bitcoin and ether. Clients will be able to trade bitcoin, ether, litecoin, ripple, and bitcoin cash on the exchange, which will operate 24 hours a day and 7 days a week.

David Mercer, CEO of LMAX Exchange, said in a statement: "We are furthering the legitimisation of the crypto currency market by offering institutions a platform on which to acquire, trade and hold crypto currencies securely with high quality, deep liquidity."

LMAX will offer cryptocurrency custodian services to clients who trade on its exchange, solving one of the major problems that have prevented institutional investors from dabbling in cryptocurrencies.

Banks and hedge funds have been reluctant to buy these new assets given the difficulties in holding and securing them.

LMAX Exchange was launched in 2010 as a multilateral trading venue for foreign exchange and has transacted over $10 trillion of fiat currency since launch.

Mercer said: "We've applied everything we've learned in the institutional FX market to LMAX Digital, to create a fundamentally improved, secure digital exchange based on our proven trading technology, market-leading liquidity and transparent and precise execution."

The launch of LMAX Digital comes just days after JPMorgan created a new position of head of crypto strategy and weeks after Goldman Sachs signalled its intention to begin trading bitcoin-linked products. Crypto hedge funds have also been springing up, with an estimated 167 launched in 2017 according to research firm Autonomous Next.

Crypto hedge funds have largely relied on "over the counter" market makers to purchase cryptocurrencies rather than transparent and centralized exchanges. This is because most of the crypto exchanges globally cannot handle the order sizes required without big changes in price. Startups such as B2C2, Circle, and Coinbase have emerged as leading over the counter brokers for institutions, but the sums involved remain small compared to other asset classes.

Mercer said: "The rise of institutional trading of cryptocurrencies will be a game-changer for the industry. We believe our new exchange will support the transformation of the crypto market from the fringes to the mainstream.

"Digital currencies are, without a doubt, coming of age. Exchanges will play a crucial role in bringing the major cryptocurrencies into wider circulation, helping them to become accepted into conventional funds which in turn will help to support a normalisation of value."

LMAX Digital will be run out of London initially but Mercer said that the company's data centre infrastructure will soon be replicated in New York and Tokyo to support clients in those markets.