Gemini Trust Co., the New York-based digital currency exchange founded by the Winklevoss Brothers has begun the first-ever daily bitcoin auction in a bid to facilitate trading with higher volumes at lower costs with better prices.
Starting today, the bitcoin ecosystem will see an exchange adopt a daily bitcoin auction at 4 P.M New York time, every day including holidays and weekends.
In an announcement, Gemini said it ushered in its daily bitcoin auction to remedy the “incredibly inefficient” method of bitcoin trading today, wherein exchanges are missing mechanisms that are otherwise commonplace in financial marketplaces.
Traditional asset exchanges like Nasdaq and the New York Stock Exchange see daily auctions and there are advantages to the mechanism when ported to bitcoin trading, according to Gemini.
In quotes reported by Reuters from New York, Gemini CEO Tyler Winklevoss said:
Auctions create greater price discovery and liquidity, resulting in a very meaningful final auction price. If you were building a securities exchange today, an auction would be a core feature.
Gemini users will be able to enter Auction-Only Market and Auction-Only Limit Orders to place bids for buying and selling bitcoin at 5 P.M. Eastern Time for the next day’s auction at 4 P.M.
The orders will be filled at the final auction price at 4 P.M ET on the day of the auction. This number is determined by finding the price at which the greatest aggregate buy demand and aggregate sell demand from all participating orders can be filled. ‘Indicative auction prices’ are broadcasted from 3:50 P.PM ET every day over Gemini’s market data API and its website. Every minute until 3:59 P.M., a new price is calculated by simulating the auction process for the order books during that minute. In essence, participants have 9 minutes every day to determine if they want to follow through with the bid or pull out.
Gemini sees the new mechanism facilitate high volume trading between customers at a stable and fair price. Furthermore, price slippage is minimized since trading is rounded up to a single and specific moment, resulting in increased liquidity. Auction trading will also be eligible for rebates up to O.15%, compared to OTC trading that can cost the trader anywhere between 1-2% per trade.
Additionally, auction trades see instant settlements with funds made available for immediate transfers, unlike OTC trading that could require several loops of verification and time due to funds transfer for that trade, etc. Also, there is no risk of Counterparty since auction trades are processed and settled from pre-funded accounts.
For now, only BTC/USD trades will be facilitated but Gemini says all of its other trading pairs will be enabled in the coming weeks.
Gemini’s daily auctions are enabled at a time when the brothers are looking to list the Winklevoss Bitcoin Trust, their bitcoin exchange-traded fund (ETF) to Bats Global Markets, under the ticker symbol “COIN”. If approved by the SEC, it will be the first bitcoin ETF to gain the Securities and Exchange Commission’s approval. Bats is now the second largest US equities market operator and a popular destination for ETFs.
In a statement to Bloomberg, Bats CEO Chris Concannon said:
We view the launch of an end-of-day auction as a significant step forward for Gemini and the bitcoin industry.
Images from iStock/Rich Legg and Gemini.
Last modified: May 21, 2020 10:16 AM UTC