How to build a trading platform: things to consider in 2019

This year Bitcoin is celebrating its tenth anniversary. The emergence of the first decentralized cryptocurrency built on top of blockchain technology changed the finance world forever. Now, as of mid-2019, we have over 2300 cryptocurrencies, and that number is constantly growing. This inevitably leads to an increased demand for the services and tools provided by online trading platforms.

If your company wants to jump on the bandwagon and launch a crypto project, we’d like to share our experience with you. This spring our team started building a hybrid trading platform for our partner from Israel, using React and Node.js. Though the release is scheduled for next year, we have already learned several important lessons so far. This article contains basic information you should consider before taking your first steps.

trading mobile platform e-trading

What is a trading platform?

Investopedia defines a trading platform as “the software that enables investors and traders to place trades and monitor accounts through financial intermediaries”. These platforms are available from any location and offer various benefits such as:

  • Lower entry costs and minimal fees for users. Thanks to automation, trading apps can drop monthly fees and per-trade commissions. Some online brokers let users buy and sell for free or next to nothing.
  • Zero minimum initial investment. To start trading, a novice has to set up an account and deposit a certain sum of money into it. What that minimum deposit is depends on the interactive broker you choose and ranges from $1 to $10,000 or more. However, there are trading platforms with no minimum deposit which means you can open a brokerage account with no money at all.
  • Simulated trading. Not all users are ready to risk their assets right off the bat. For beginners, many online brokers provide a virtual trading option, so clients can practice their skills using fake currencies.
  • Automated trading systems (ATS) or algorithmic trading. Automated trading technologies enable experienced investors to implement their strategies without the need to constantly monitor quotes and charts on the screen. They can just place their sell or buy order and let an ATS execute it under specified conditions — for example when exchange rates or asset prices reach certain numbers.

Trading platform types

There are dozens of trading platforms online, but all of them fall into two large categories depending on the traded assets.

For traditional assets

Traditional trading platforms help clients invest money into time-honored assets including stocks, ETFs, options, mutual funds, futures, bonds, currencies, and precious metals.  There are multi-asset platforms and those tailored to specific financial sectors, such as bond markets, futures market, etc.

For cryptocurrencies

Cryptocurrency trading platforms facilitate selling and buying of digital assets like Bitcoin, Litecoin, Ethereum, and NEM, to name a few. They carry out cryptocurrency exchange transactions and give their users analytical tools to make well-informed decisions.

There are two main models of cryptocurrency exchange:

  • Centralized crypto exchange (CEX). Currently, centralized transactions make up the lion’s share of trade volume in global industry. In this model, there is a middleman — namely, an interactive broker — who executes all transactions and charges fees for provided services. It is worth noting that trading platforms for stocks, futures, and other traditional assets stick to a centralized scenario and  use intermediary services.
  • Decentralized crypto exchange (DEX). DEX exchanges provide peer-to-peer transactions and don’t need any intermediaries, which results in almost non-existent trading fees. Besides, DEX platforms don’t require personal information or any documents to prove your identity. Transactions executed with a DEX are anonymous, transparent, and more secure, as clients deal directly with each other. However, despite all the advantages, DEX’s seize only 19% of the global exchange ecosystem, with less than 1% of trading volumes. In terms of speed and liquidity, they still lag far behind their centralized counterparts. And we know too well that time is money.

centralized exchange vs decentralized exchange, cex vs dex

Trading platform apps: must-have features

No matter the size, type, and available assets, a trading platform app should include the following features:

  • Multi-factor authentication. Security is the number-one concern when developing fintech software. It is strongly recommended that such apps use multi-factor authentication to add an extra layer of protection. In addition to a unique username and password combo, clients are supposed to confirm their identity by answering a secret question, inputting a code sent via email or SMS, or authenticating themselves with biometric methods. To learn more about securing a fintech app, read our article here.
  • A visually rich and customizable dashboard should contain all necessary analytical tools, charts, watchlists, streaming of quotes, and so on. These real-time visualizations will give traders a quick picture of what is happening on the global financial market.
  • Sorting and filtering tools let customers narrow down the displayed financial data to what they are looking for.
  • A search bar is another option to find the important information.
  • A user profile allows your clients to manage personal data, change security settings, and add bank or credit card accounts.
  • A newsfeed provides users with an overview of the financial markets in real time and keeps them up to date about the latest trends and important events.

Before designing all these useful features, think about the foundation of your platform. In the first place, it should be scalable to cope with an increasing number of customers. We advise building trading platforms on top of the microservices architecture. This will prepare your project for explosive growth and enable you to seamlessly implement new services without the need to redeploy the whole app.

trading platform for cryptocurrency

Best countries for crypto trading

With a trading platform, you have to consider not only technical aspects but regulatory compliance as well. The financial rules vary a lot across countries, and things get even more complicated when it comes to cryptocurrencies. You need to study the regulations of the targeted region carefully or hire an expert who will navigate you through the minefields and bottlenecks of a particular law landscape. Below is a list of the most crypto-friendly countries to launch a trading project:

Australia has the world’s clearest tax regulation for crypto and treats bitcoin as property. To operate in Australia, crypto exchanges must comply with Know Your Customer (KYC) and Anti Money-Laundering (AML) regulations, so users are required to verify their ID.

Gibraltar doesn’t recognize crypto as a legal tender, yet it has clear regulatory frameworks that allow for crypto exchange transactions. Additionally, the government provides a low taxation environment and facilitates simplified licensing for fintech companies and ICOs.

Estonia features transparent and innovative cryptocurrency regulations, compared to other EU member states. Crypto has a status of ‘value represented in digital form’. Crypto exchanges are legal and subject to Anti Money Laundering and Terrorism Finance Act.

Japan, the homeland of Satoshi Nakamoto, who developed bitcoin, is now the world's biggest bitcoin trader. It comes as no surprise that here digital currencies are legal, treated as property and accepted in retail stores.

Malta is often referred to as ‘the first blockchain island in the world’. The country recognizes cryptocurrencies as a ‘medium of exchange’. Blockchain and crypto-related bills create a transparent climate that attracts digital asset players from different countries. In 2018, the world’s largest crypto exchange,  Binance, relocated from Hong Kong to Malta.

Switzerland, or to be more precise, the Swiss canton of Zug, became the first place in the world to allow paying taxes in bitcoin. Now the city of Zug is known as the capital of Crypto Valley — a tax-free hub for blockchain entrepreneurs, investors, and trading services companies.

Best online trading platforms

If you want your trading platform development efforts to lead to success, it’s important to have as good an understanding as possible of your competitors. Awareness of their strengths and weaknesses will help your team create a unique selling proposition. We’ve chosen five different examples to give a little guidance.

TD Amitrade

Trading platform for stocks, options, mutual funds, ETFs, futures, bonds, and certificates of deposit (CDs).

This online brokerage provider maintains over 11 million user accounts and processes over 900,000 trades per day. It charges higher fees per trade than other platforms, but in return, offers a wide selection of trading tools,  mock trading, free research, portfolio-building guidance, 24/7 customer support, and many other services. It uses AI-based technologies and, besides, has its own media network to broadcast interviews, commentary, and educational videos.

TD Amitrade is an affiliate of a bricks-and-mortar TD Bank so traders have access to traditional banking services as well.

td amitrade dashboard

Coinbase

Trading platform for Bitcoin, Ethereum, Litecoin, and USD coin.

One of the world’s largest bitcoin brokers services over 20 million users globally. You can buy and sell major cryptocurrencies using a linked bank account.  The best thing about Coinbase is that all the funds traded on the platform have insurance coverage to protect them against system failures or hacking.

Up to 2019, the global trading platform operated in 40+ countries. But this year it has expanded to 11 new markets including Latin America, South East Asia, and New Zealand. In some of these new countries, the company provides crypto-to-fiat exchange support.

coinbase dashboard

Bittrex

Trading platform for 190+ cryptocurrencies.

This US-based blockchain platform offers its customers lightning-fast transactions, safe digital wallets, and real-time updates along with leading security technologies and multiple layers of protection. With Bittrex, you can trade more than 190 cryptocurrencies globally, paying 0.25% commission. The platform complies with the Bank Secrecy Act, U.S. economic sanctions laws, and other regulations. It only allows for crypto-to-crypto exchange and doesn’t execute operations with fiat currencies.  

bittrex dashboard

McAfee Magic

Trading platform for 500+ digital сurrencies.

The all-in-one platform for digital currency trading is named after its creator John McAfee. One of the best-known Bitcoin advocates launched his project in June 2019, with the following explanation: “The ‘magic is that novice traders are not required to fund ‘trader accounts'. Novice retains control over access to their funds at exchanges.”

McAfee Magic combines manual and bot trading across multiple exchanges. Its users can quickly execute hundreds of trades on different platforms based on preset terms.

mcafee magic dashboard

DX Exchange

Trading platform for cryptocurrencies, digital stocks and ETFs, and Security Token Offerings (STOs).

DX Exchange is the first cryptocurrency trading platform that enables its customers to buy and sell digital assets with both crypto and fiat currencies. DX Exchange uses Nasdaq matching engine and market surveillance tools. The trading capabilities are available 24/7. Fees per trade depend on monthly exchange volumes.

dx exchange dashboard

Some trading platform takeaways

The financial world is undergoing a digital revolution that means new opportunities for innovative businesses are constantly emerging. Moreover, there is a range of countries offering favorable terms for crypto entrepreneurs, and the number of these “Bitcoin hubs” is expected to grow in the future. If you feel that now is the right time to start developing trading software, we are always ready to discuss the prospects with you. Contact us to talk a bit about Bitcoin!

 

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