Crypto OTC Broker — Make Deals as Easily as Possible on Your Exchange
May 2, 2022
Introduced in HollaEx update 2.3, the OTC broker allows buying and selling assets at fixed rates, defined by the exchange owner, improving convenience and speed of use for your users.
What is the OTC Broker?
The Over-the-Counter (OTC) Broker, gives you and your users the quickest and simplest way to trade on your platform. Transactions that take place using the brokering service don’t require the use of the public Orderbook and have less reliance on the HollaEx network. Instead, these Broker transactions take place entirely within your exchange leading to an increase in transaction privacy and reducing required computational power.
Currently, the OTC Broker uses static pricing; buy and sell prices are defined by you and do not change over time, thus users who wish to carry out a trade know exactly what they will get, and what it will cost them. This behavior differs from the Orderbook, as due to its nature of real-time price fluctuations, the deal the user executes may change from what they had originally intended.
Setting up pairings does not require any donation of XHT, so long as the asset was previously added, an unlimited number of deals can be set up via the OTC Broker, and best of all setting these up is completely free.
How Does It Work?
With this new feature, your quick trade now has two means of completing trades, defined by the exchange operator on a pair-by-pair basis:
Without setting up any broker deal, the exchange’s default behavior on the Quick Trade tab is to use the orderbook, as was the case before v2.3.
If a Broker deal is set up, the behavior of Quick Trade changes. With it, static pricing is set up between the asset pair. The instant that this broker deal is removed, the pair will return to using the orderbook price. If paused, Quick Trade will display that the broker is unavailable.
When setting up an OTC Broker deal, instead of sourcing funds from the shared crypto liquidity pool of the HollaEx network, the Broker will instead use the inventory of a ‘Source Account’, and the wallet associated with it. Watch these videos about HollaEx's OTC system on YouTube to learn even more.
This means that when users desire to complete a trade using the OTC Broker an account (the source account) under your control will supply and receive the assets that are to be traded in the deal. This circumvents entirely the HollaEx network and thus keeps the entire trade within the confines of your exchange.
In regards to transaction fees, the OTC Broker will use the same rates as you have defined in the Operator Controls.
Why Use OTC Broker over the Orderbook?
If you already have been running your exchange for some time, or are new to HollaEx, why go through the effort to change from what is already working? Or should every trade on your exchange now utilize this new OTC Broker, instead of the Orderbook?
The reasoning behind what choice of method for your trading pairs to use should depend on what your goals for each trading pair will be, taking into consideration the traits of each method.
Ease of Use
The main draw of OTC Broker is in its simplicity. Both for users, and for you as the exchange’s operator, removing the need for the more involved maintenance required in managing orderbook-based trades.
Static pricing makes the transaction more similar to a traditional shopping experience users will be familiar with. Your exchange offers an asset and the user trades a fixed amount of another asset in return for it. This differs from the orderbook process, where using the Pro trade screen could be intimidating for users unaccustomed to how it works.
By offering the simplest possible avenue of trade for your users, you can ensure that all the possible obstacles are removed, creating the most seamless experience possible.
Of course, though, these novice users will not be the only customers you want to interact with within your exchange. More experienced users who are used to the constantly updating dynamic prices that are a foundation of cryptocurrency and expect to be able to take part in these types of markets. For those such users, and the pairs that benefit from this more traditional behavior, the Orderbook method remains.
As mentioned previously, one of the main differences is that the OTC Broker will use a static price, although dynamic pricing will be available in future updates.
One of the clear advantages here is that by implementing this simplicity, price premiums can be implemented for this speed and convenience, allowing creation of profitable opportunities by setting sell prices above the orderbook average and buying prices lower.
In a more stable currency, static pricing may be beneficial ensuring for both you and your users a fixed price, where both parties know exactly what will happen. Also, if you are offering a new token you may want to start it off at a fixed value, giving it a stable base to begin upon, assisting in the process of price discovery.
However, for other, more well-known pairs, such as BTC or ETH, the dynamic pricing sourced from the orderbook may be the way to go. For example, if a coin were to take off in value, both you and your users would want to be able to take advantage of this fact and static pricing may adversely affect this.
These issues emphasizes the importance of considering whether any given pair on your exchange will benefit from static (from the OTC) or dynamic (from the orderbook) pricing. This decision that is left to you.
Where to Set up an OTC Deal?
Setting up a deal with OTC Broker is almost as easy as a user trading with one. From the operator controls on your exchange, the OTC Broker tab found under assets has all the controls for setting up and editing current OTC Broker deals. For a greater level of detail on creating and configuring deals, check out the HollaEx documentation. or this video.
Hopefully, now you have some ideas of where your exchange would benefit from using this new method of trading and are excited to get started. The new stuff doesn't end there though, update v2.3 is a mammoth release for HollaEx and contains all sorts of new ways to improve your HollaEx exchange. Check out this newsletter to learn more.
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