Connamara Quarterly - Fall 2019

Thoughts from our CEO

There has been talk lately about the rise of Decentralized Exchanges (DEX) and how they differ from traditional centralized exchanges that utilize a central limit order book (CLOB) to match buyers and sellers. In a nutshell, a decentralized exchange utilizes smart contracts and blockchain to facilitate order matching and trade settlement in a peer-to-peer transaction.

Being in the business of building CLOB-based exchanges, I have been thinking about whether decentralized exchanges will be the exchange topology of the future.The stated major advantage of a DEX is that the participant on the DEX does not need to place their tradable assets with the “exchange.” This avoids the loss of the participant assets through a failure of the exchange, hacking, or other means.

In traditional capital markets, which use centralized exchanges, the problem of protecting participant assets has effectively been solved. It is solved through a separation of risk by segregating customer account funding (brokers) from the order matching (the exchange) from trade settlement (the clearing house). Each of those entities have a set of regulations and capital requirements that must be met. There is also a system of cross guarantees whereby entities responsible for holding participant assets are obligated to cover any participant losses in the event of a default or failure of an entity.

In my opinion, the way to solve the asset protection issue of centralized exchanges is to model the market after traditional capital markets by instituting a solid separation of interests between participant acquisition, order matching, and transaction settlement along with a solid regulatory structure to ensure compliance.

Given that the problem of participant asset protection has already been effectively solved, I can’t see DEXs replacing CLOBs anytime in the near future.

– Jim Downs

Industry Insights

Getting To Market Fast Is The Difference Between Success Or Failure

JLN News - Developing new markets, especially when there is strong competition, is all about speed: not microseconds, but days, weeks or months. It’s been proven time and again with failed exchanges that it simply took too long to get to the starting gate. Eurex US, the Eurex effort to…
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In The News

Articles to reflect upon

5 Questions To Ask a Prospective Exchange Technology Partner
BY: Markets Media

Markets Media -  It’s no secret that exchanges have undergone a drastic transition in recent decades, moving from physical trading pits to electronic versions. While it is true that trading in most major asset classes — equities, fixed income, futures, foreign exchange — is now electronic, the number of products,…
Read more »

5 Questions To Ask a Prospective Exchange Technology Partner
BY: Markets Media

Markets Media -  It’s no secret that exchanges have undergone a drastic transition in recent decades, moving from physical trading pits to electronic versions. While it is true that trading in most major asset classes — equities, fixed income, futures, foreign exchange — is now electronic, the number of products,…
Read more »

5 Questions To Ask a Prospective Exchange Technology Partner
BY: Markets Media

Markets Media -  It’s no secret that exchanges have undergone a drastic transition in recent decades, moving from physical trading pits to electronic versions. While it is true that trading in most major asset classes — equities, fixed income, futures, foreign exchange — is now electronic, the number of products,…
Read more »

Inside look: JOHN VATIANOU, CHIEF CLIENT OFFICER

WHAT ARE YOUR PRIMARY RESPONSIBILITIES AT CONNAMARA?

I'm the Chief Client Officer at Connamara Systems. My responsibilities include managing a cross-functional team providing post-delivery services to clients, maintenance of open source projects, servicing support contracts and information security policies and procedures. All of this is to align the fulfillment of the Connamara mission and strive to create and maintain a consistent, repeatable, and scalable customer experience.

WHAT ARE YOU MOST EXCITED ABOUT WORKING ON RIGHT NOW?

I'm always excited to work with entrepreneurs to help them succeed. It's what makes working at Connamara so rewarding. We get to see an idea go from pen and paper to actual implementation.