Institutional grade: Nobel bitcoin exchange to woo Wall St. with Nasdaq trading technology

By Michael Carney , written on March 24, 2015

From The News Desk

The Nasdaq brand travels the world over. I remember spending time in Asia in the mid-aughts as a banker trying to convince local technology companies to pursue small-cap IPOs in America. For these founders, it was Nasdaq or nothing – the NYSE didn’t even register as an option. The glimmer of Nasdaq’s technology-powered platform took a hit within Silicon Valley following the debacle of Facebook’s IPO, but nevertheless, the exchange is known as the most progressive and forward-thinking of global exchanges.

So when I first heard the news that Nasdaq technology will be powering the Noble bitcoin exchange, which was founded by former Goldman Sachs head of electronic trading platforms John Betts, my immediate reaction was, “This is big.”

I’ve talked a lot about the power of big brand association and Bitcoin. It was huge when Dell and Expedia decided to accept the virtual currency as a payment option. It was a similarly seminal moment when PayPal (and its subsidiary Braintree) made it seamless for its merchants to adopt bitcoin. In the last two weeks, news that IBM and later Intel are doing major R&D around the Blockchain and pushing their Tier 1 global clients to do the same was a highly positive development.

Bitcoin’s biggest challenge in its early days has been generating mainstream awareness and overcoming the fear stemming from sensationalist media coverage and a reactionary regulatory climate. The next major issue holding back Bitcoin has been a (justifiable) fear that many of the largest wallet and exchange platforms in the ecosystem are in far off countries and run by inexperienced or sometimes unknown founders. This is beginning to change, but there’s far more progress that can be made in identifying and driving adoption toward the most sophisticated and trustworthy platforms.

Yes, Bitcoin has hit some speed bumps in its early days. But Bitcoin and more so the Blockchain are the way of the financial future. The more marketing muscle and positive brand association surrounding the industry, the better. Hence, adding Nasdaq and Goldman Sachs (by way of Betts’ resume) is big news for bitcoin.

Noble isn’t the first bitcoin exchange to have close ties with a major stock exchange. Coinbase announced in January that it had raised a massive $75 million round of funding that included the New York Stock Exchange (NYSE) among the investors. Two weeks later, the company launched the first regulated US bitcoin exchange with NYSE as a “partner.”

It’s less clear what role the NYSE played or plays in developing and rolling out the Coinbase Exchange, than it is in the case of Noble. In the latter case, a 35-year-old technology-driven stock exchange that today supports $8.5 trillion worth of market cap is lending its expertise to an emerging bitcoin platform. More specifically, Noble will be one of 30 global marketplaces to utilize Nasdaq’s X-stream multi-asset technology. Nasdaq’s describes the platform as:

...designed for markets that want to expand their offerings with new products or market models, meet the challenge for high performance with low latency, control risk with sophisticated pre-trade position and risk management, provide third-party hosting services, or trade in multiple languages.
While Coinbase is focused (at present) on the consumer bitcoin makert, Noble is going after institutions. Specifically, Betts describes the soon-to-launch platform as “a bridge between the traditional financial and bitcoin communities” and a source of liquidity to existing bitcoin exchanges, according to Coindesk. He tells the crypto-currency publication:
"We’re not trying to fight for a slice of the pie, we’re building the venue where the large capital that exists in the capital markets and corporations that use these products as part of their business needs, where we can provide that liquidity to other exchanges. The goal is to create a larger pie.”
Betts adds, “[These institutions] need counterparties that will provide the services they need to do business, and they have not had a counterparty that they’ve been able to trade bitcoin with.”

Noble hasn’t launched yet so it’s best to reserve final judgement until we see the actual product in the market and get feedback from its users. But insofar as it’s possible to establish credibility for your platform and the ecosystem as a whole pre-launch, Noble is pressing all the right buttons. For the sake of bitcoin’s reputation, here’s hoping the payoff is as good as the foreplay.

[Image via]

[Disclosure: Michael Carney has accepted a position as an associate at Upfront Ventures that begins in April. To the best of Pando’s knowledge, the companies in this post and their competitors have no affiliation with Upfront. This post went through Pando’s usual editorial process.]