Binance and OKX will have tightened regulations on prime brokerages, which will affect trading fees and compliance by July 17.
TakeAway Points:
- By July 17, prime brokers are required by OKX to submit subaccount details, and noncompliance may result in restrictions or account closures.
- Prime broker rebates have been impacted by Binance’s recent closure of a flaw in its fee structure meant to maintain compliance and fair trading.
- Bybit prioritises user interests and compliance; while it is keeping an eye on these developments, it has no intentions to change its present price schedule.
Crackdown on Prime Brokerage activities
Cryptocurrency exchanges are intensifying their scrutiny on prime brokerages that bundle clients’ orders to benefit from lower VIP trading fees. OKX, the second-largest exchange by volume, has recently taken a significant step in this direction.
In a letter reviewed by CoinDesk, OKX requested prime brokers provide detailed information about their subaccounts, including the names of the entities or individuals controlling each subaccount and their respective jurisdictions. The deadline for this information is set for July 17. The letter explicitly stated, “A failure to do so may result in undisclosed subaccounts being restricted from trading and/or subaccount closure.”
This move by OKX follows a similar action by Binance, the largest cryptocurrency exchange by volume. Earlier this month, Binance altered its Link Plus interface, effectively closing a loophole that allowed prime brokers to use a multitiered fee system to offer rebates to clients. Binance justified this measure as necessary “to uphold compliance and ensure a level-playing field for all users, whether they access Binance directly or via an intermediary.” This development was initially reported by Bloomberg.
Impact on Prime Brokerages
The changes implemented by OKX and Binance are aimed at dismantling the practice where prime brokerages funnel multiple clients’ trades through a single account to qualify for lower fees. This practice has been a common strategy among prime brokerages to offer competitive pricing to their clients. A person familiar with the prime brokerage industry, who requested anonymity, commented, “This is being done very much for the purpose of disbanding clients under brokers to price them separately.”
OKX has declined to comment on the matter. However, the implications of these changes are significant for prime brokerages, which may now face higher trading costs and operational challenges as they adapt to the new requirements.
Bybit’s Position
Bybit, another major cryptocurrency exchange, is closely monitoring these developments. Eugene Cheung, Bybit’s head of institutions, stated, “We are closely monitoring the recent developments regarding the removal of the prime brokerage multi-tiered fee structure by other platforms.” Despite this, Bybit has no immediate plans to alter its fee structure.
“Our commitment remains steadfast in ensuring compliance and the best interests of our users,” Cheung emphasized.
Bybit’s decision to maintain its current fee structure could position it as an attractive alternative for prime brokerages and their clients, who may be affected by the changes at OKX and Binance. However, the broader trend towards increased scrutiny and compliance measures in the cryptocurrency exchange industry suggests that similar actions could be taken by other exchanges in the future.
