Technology for Crypto Prime Brokers

What a prime broker needs from technology

Prime brokerage bundles clearing, financing and custody so institutional clients can trade across many venues through one relationship. For a firm building that offer in digital assets, the technology needs reduce to four.

• Multi-venue execution. One order workflow reaching many exchanges and liquidity providers.
• Credit and risk controls. Limits that apply before an order leaves the building, and an emergency stop.
• Settlement and custody integration. A ledger of record that connects to the custodians clients already use.
• Reporting. Positions, profit and loss, and an audit trail a compliance team can rely on.

Liquid Mercury, the Chicago-based institutional digital asset infrastructure provider, built its platform to cover these needs for banks, brokers, exchanges and asset managers. The buyer guide is crypto prime brokerage explained.

Execution and order management

Mercury Pro is an execution and order management system for digital assets. It gives a desk a centralized order book across all connected venues, with complex order types, real-time execution tracking, and automated order flow and approval workflows.

Execution runs on smart order routing and an algo suite covering spot, perpetuals, futures and options, with direct market access to connected venues. Read the order management system glossary entry if the OMS and EMS split is new to you. A single screen shows aggregated positions, risk and balances across venues, which is the view a prime desk uses to supervise client flow.

Risk controls for prime desks

Risk is where a bank's credit and compliance teams will spend their diligence time. Mercury Pro layers three controls. The Basel Committee's prudential treatment of cryptoasset exposures sets out an international standard for these capital exposures; applicable requirements depend on implementation in each bank's jurisdiction.

Prevent. The Risk Engine continuously evaluates orders, positions and fills across spot, perpetuals, futures and options. Limits include maximum notional, maximum quantity, maximum open orders, maximum filled plus open notional and maximum position, configurable per client, account, instrument type or symbol. If any threshold or limit is breached when sending a new order, the Risk Engine rejects it.

Pre-trade checks add available balance, available credit, region restrictions and a hyper-marketability check. The credit check includes a credit warning at a configurable percentage of available credit, which administrators can override, and a hard credit limit that blocks orders above total available credit. Account-level credit is evaluated against data provided by the client or a third party in real time. Region restrictions let you block an asset for accounts in a given jurisdiction.

Pause. The kill switch lets authorized administrators immediately halt trading across supported exchanges and accounts. It cancels all open orders and blocks new submissions until trading is re-enabled.

Resolve. Auto-Liquidation flattens an account's positions from the Positions screen, in an aggressive mode or in a passive, scheduled mode that slices the unwind over time. Liquidation orders can bypass standard risk checks to support a controlled unwind; completion depends on venue availability, liquidity and order constraints.

Connectivity

Mercury Pro offers FIX, Binary, REST and WebSocket APIs for buy-side and sell-side workflow automation, so it can plug into a bank's existing portfolio and order systems. It connects to custodians, OTC liquidity providers and exchanges.

Protocol and venue detail lives in crypto venue connectivity.

Settlement, custody and ledger

Mercury Ledger provides real-time position keeping and reconciliation across fiat and tokens. Custody integration is part of the platform, with BitGo as a custody partner across Liquid Mercury products. Settlement can use delivery versus payment, where final asset delivery is conditional on final payment. This reduces principal settlement risk; liquidity, operational and replacement-cost risks can remain. The BIS Principles for financial market infrastructures explain why linking the two legs of a trade matters.

A prime desk usually runs clients on more than one custodian. Mercury Pro connects to several custody providers, so client assets can stay with the custodian each client prefers while the desk keeps one view of balances. US banking agencies set out their view of crypto-asset risks to banking organizations in a joint statement.

Reporting and audit trail

Reporting covers the daily questions a prime desk gets from clients and compliance. Mercury Pro tracks real-time profit and loss and exposure, calculates margin and raises alerts, produces comprehensive risk dashboards and reports, supports automated regulatory reporting workflows, and keeps an audit trail on every transaction.

Deployment: white label and modular

The platform is modular. Each component works independently or together, so a firm can start with execution and add ledger, OTC and reporting as the business grows. A white-label option puts a firm's own brand in front of its clients, and the desk can be extended to RFQ and streaming quote workflows with Mercury OTC. Implementation scope depends on the firm.