CME CME Group Inc

By Alexander Osipovich 

Cryptocurrency exchange Coinbase Inc. is ending an ambitious effort to win over high-frequency traders, the latest sign that bitcoin companies are having trouble attracting mainstream financial players.

As part of the move, Coinbase laid off about 30 people in its Chicago office who had been working to improve the company's technology to cater to speedy traders, Coinbase President and Chief Operating Officer Asiff Hirji said in an interview. The employees had been hired from local firms like futures exchange giant CME Group Inc. and high-speed trader Jump Trading LLC, he said.

High-frequency trading, or HFT, firms play a huge -- if controversial -- role in U.S. stock and futures markets. By some estimates, they account for around half the daily volume in U.S. equities. But they are often regarded with suspicion by more traditional investors, who fear that HFT firms eat into their profits by zipping in and out of stocks while slower-moving players execute trades.

Last year, Coinbase unveiled an effort to draw ultrafast traders by carrying out tech upgrades, including speeding up its matching engine, the system that brings together buy and sell orders.

Greater HFT activity at Coinbase would have boosted trading volumes and revenues at the San Francisco-based company, which runs one of the biggest U.S. crypto exchanges and offers a popular "wallet" service that lets individual investors hold bitcoin.

Mr. Hirji said Coinbase is focused on a growing business with financial institutions like hedge funds, endowments and family offices, rather than serving high-speed traders.

He added that a San Francisco-based team at Coinbase has sped up the firm's matching engine by a factor of 20 compared with late 2017, when an influx of investor interest in bitcoin caused slowdowns and glitches at many crypto exchanges.

Mr. Hirji said Coinbase still plans to eventually offer co-location, a practice in which trading firms place their servers directly in the data center of an exchange.

Coinbase had more than 600 employees as of late 2018, and it continues to expand head count despite the Chicago layoffs, according to a spokesman.

Bitcoin was trading at about $5,590 on Tuesday afternoon, down from its peak of nearly $20,000 in December 2017.

Write to Alexander Osipovich at alexander.osipovich@dowjones.com

(END) Dow Jones Newswires

April 23, 2019 15:40 ET (19:40 GMT)

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