Cryptocurrency Exchanges Crack Down on Brokerages Bundling Client Orders

Cryptocurrency exchanges are taking steps to prevent brokerages from bundling clients’ orders to qualify for lower VIP trading fees.

In a letter obtained by CoinDesk, OKX, the second-largest exchange by volume, has requested prime brokers to provide details of subaccounts by July 17. The information required includes the names of the entities or individuals controlling each subaccount and their respective jurisdictions.

“Failure to comply may lead to restrictions on trading for undisclosed subaccounts or even closure of such accounts,” the letter stated.

Recently, Binance, a major competitor of OKX, made changes to its Link Plus interface to close a loophole that allowed prime brokers to use a multitiered fee system for offering rebates to clients. Binance’s move aimed to ensure compliance and create a fair playing field for all users, regardless of whether they access Binance directly or through an intermediary.

Exchanges typically provide discounted trading fees to their largest customers to incentivize loyalty. Prime brokerages, which cater to professional and often large investors, could aggregate multiple clients’ trades through a single account to benefit from lower fees.

“The crackdown on brokerages bundling client orders aims to separate clients under brokers and price them individually,” mentioned a source familiar with the prime brokerage industry.

When approached for comments, OKX declined to provide a statement on the matter. On the other hand, Bybit, another prominent crypto exchange, is closely monitoring the situation. Eugene Cheung, the head of institutions at Bybit, emphasized the platform’s commitment to compliance and user interests without any immediate plans to alter the fee structure.

“Our commitment remains steadfast in ensuring compliance and the best interests of our users,” Cheung stated in an email.