It’s not often that financial giants such as Fidelity, Charles Schwab and Citadel Securities come together to form a financial entity. But the three heavyweights did just that as they teamed up to launch a new cryptocurrency exchange called EDX Markets. Let’s break down how this new platform will work and what it could offer you as a crypto investor.

A financial advisor could help you add crypto investments to your portfolio and safeguard against risks.

Fidelity, Schwab and Citadel Securities Launch EDXM

Fidelity, Charles Schwab and Citadel Securities launched a new cryptocurrency exchange called EDX Markets (EDXM). The cryptocurrency exchange will operate independently from these financial institutions, with the possibility of more partnerships forming in the future.

“We look forward to welcoming additional participants to the exchange, which will drive ongoing trading in this important asset class while creating a virtuous cycle of continually enhanced liquidity and efficiency supported by MEMX’s cutting-edge technology,” said Jamil Nazarali, chief executive officer of EDXM, in a press release.

Additional financial institutions currently include Sequoia Capital, Paradigm and Virtu Financial Inc., which have joined the partnership with the aim of enabling “safe and compliant trading of digital assets through trusted intermediaries.”

The press release says that EDXM will deliver “better prices for investors than those offered by existing cryptocurrency exchanges” by creating a “highly liquid cryptocurrency ecosystem that aggregates liquidity from multiple market makers to reduce spreads and improve transparency.”

How EDXM Handles Conflicts of Interest and Security

EDXM aims to enhance customer security and stay in regulatory compliance. The cryptocurrency exchange also wants to eliminate conflicts of interest.

According to the press release, EDXM will remove “conflicts of interest that affect existing cryptocurrency exchanges by separating responsibility for operating the exchange from the entities trading on it.”

The crypto exchange is also aiming to deliver cost-effective strategies that would start by erasing bilateral settlements. To do so, it will leverage its network of digital custodians to net and settle trades on the blockchain. EDXM says this will increase speed and efficiency at a lower cost.

The Members Exchange (MEMX) will provide EDXM with the technology infrastructure to achieve these cost-efficient trades and protect investments.

“With MEMX-supported digital infrastructure that eliminates technological and organizational bottlenecks, EDXM will be a safe entry point to crypto and serve as the exchange of choice for trading digital assets on a platform designed for and used by leading financial institutions,” the board of directors for EDXM said in the press release.

Benefits and Risks of Trading on a Crypto Exchange

EDXM could offer crypto investors a cheaper and safer way to trade digital currencies. But you should carefully weigh both the benefits and risks before trading.

In March 2022, the Department of Labor asked 401(k) plan fiduciaries to “exercise extreme care” before adding cryptocurrency investments to their retirement plans.

Additionally, the Chicago-based financial services company Morningstar had pointed out one month earlier that the correlation between cryptocurrencies such as Bitcoin and other major asset classes increased over the past years, changing how investors might want to add or exclude it from their portfolios.

Bottom Line

The creation of a crypto exchange by financial giants Fidelity, Charles Schwab and Citadel Securities is no small feat. Despite the concerns regarding the crypto market, financial institutions still see cryptocurrency as a potential financial gain. But before investors trade on EDXM, they should consider both the benefits and risks, and even consult a financial professional to help them develop an investment strategy.

Investing Tips

• A financial advisor can tell you how to work crypto investing into a broader financial strategy. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

• Investing in crypto can be fun and interesting, but don’t bet your retirement on it. Make sure you first fund your 401(k), if you have access to one, or an IRA if you don’t.

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