itBit Launches Bitcoin Exchange with $5.5M in Funding

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Today itBit, a global bitcoin exchange, announced their official launch as well as the completion of their second round of funding. The company raised a total of $5.5M, with the most recent round closed over the last month for $3.25M. itBit is opening trading today for non-US institutional and retail traders, as well as some US institutional traders.

The exchange is headed by Rich Teo, who previously worked as a Senior Analyst at Cedar Hill Capital Partners and Citigroup as an M&A analyst before that. itBit has offices in Singapore, Shanghai and New York, and is looking to serve the full global market of bitcoin traders. The latest funding round was co-led by Canaan Partners and RRE Ventures, with Liberty City Ventures, Ben Davenport and Jay Jordan also participating.

Liquidity Provision

teo

Rich Teo – CEO of itBit

Trading will be available is USD, SGD and EUR, with fees based on a maker-taker model, wherein traders adding orders to the book receive a 0.10% rebate and traders taking liquidity off the book via market orders pay 0.70% or lower, based on volume. By economically incentivizing limit orders, the maker-taker model encourages traders to leave orders on the book, promoting deeper liquidity in hopes of avoiding the low shallow books that so many existing exchanges have encountered when starting out.

itBit is pursuing additional liquidity measures outside of the pricing model, including a relationship with a quantitative trading firm for professional market making. Per agreements between itBit and that firm, the firm will not receive rebates for adding book depth, but instead a share of fees generated from trading volume. According to Teo, the fee-sharing arrangement is to encourage tighter bid-ask by driving the market maker’s incentive towards volume, rather than spread to market.

Compliance

itBit has invested significant resources into appropriately addressing the regulatory environment with a Singapore-based Head of Compliance, as well as enlisting Thomson Reuters for registrant screening and Jumio for identity verification services. The company does not yet have US money transmission licenses, but is currently pursuing state-by-state licensing and partnering with an established international money transmission company in the interim, with service to US retail customers potentially available before the end of year.

Technology

The itBit team wants to see bitcoin traded like any other foreign currency, which also means advanced technical infrastructure, according to Teo. The exchange’s engine was built based on NASDAQ open-source technology and is capable of handling millions of trades per second, which gives itBit order of magnitude margin for market growth before having to update their systems. The company is also employing globally-redundant cloud hosting and Akamai DDoS protection to ensure reliability and uptime, as well as FIX APIs to meet broader ForEx technical standards.

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