Disclosures

Pricing and Fees

Methodology

ZHEU enables End Customers to buy, sell and swap crypto assets in a request-for-quote (“RFQ”) exchange service and a central limit order book (“CLOB”) trading platform service. The RFQ exchange service offers a more simplified trading experience. It simply allows the End Customer to first specify how much they are willing to trade for a selected crypto asset through the front-end made available to End Customers by one of Zero Hash’s Platform Operators offering the RFQ exchange services. End Customers are then presented with a quote, and then subsequently have the option to accept the quote if they wish. Each Platform Operator will only be able to provide either the CLOB trading platform service or the RFQ exchange service to their End Customers, not both. The Platform Operator will make clear to the End Customer which of the CLOB trading platform service or the RFQ exchange service is being provided.

The CLOB is meant to provide a more sophisticated trading experience by offering different order types such as Market, Limit, Stop-limit, etc.

In addition, ZHEU offers, on request, the ability for clients to trade with ZHEU in crypto assets in an 'over-the-counter' (“OTC”) manner.

For the avoidance of doubt, blockchain fees may apply to on-chain transactions (i.e. crypto-asset withdrawals) and are payable by the End Customer.

Request for Quote (RFQ)

Price Sourcing

While ZHEU determines the prices it quotes under the RFQ service, ZHEU will source price information from various liquidity providers including some of the biggest and reputable liquidity providers in the crypto asset markets, optimizing for competitive pricing, service uptime and liquidity redundancy.

ZHEU receives pricing quotes provided by the connected liquidity providers in real-time. These quotes include bid (buy) and ask (sell) prices at various quantity levels for a wide range of supported crypto assets. ZHEU build its own order book based on these quotes as set out below.

Market volatility will of course impact the prices that are exposed to End Customers. If the volatility or overall price of Bitcoin increases, for example, it will likely also increase on the ZHEU platform.

Order Book

An internal order book is structured by ZHEU to prioritize prices it receives from various liquidity providers (“LP”), with bid prices arranged from highest to lowest and ask prices arranged from lowest to highest in an internal administration of ZHEU referred to as the ZHEU order book. When an End Customer requests a quote for a specific crypto asset and quantity, the ZHEU system calculates the best price based on the prices available in the order book for the requested quantity and submits that to the End Customer with an included spread as outlined below. On average, End Customers will buy at a weighted average price that can be different from the initial best price level available in the order book of ZHEU.

Quote Expiration

The End Customer is then returned a quote constructed by ZHEU that will have an expiry time in which they can choose to execute or allow the quote to expire. ZHEU supports a configurable quote length (for example 5 or 30 seconds) that ZHEU can configure on a Platform Operator-by-Platform Operator basis. Quote expiration is dependent on the configuration and use cases offered through our Platform Operator clients.

To support pricing for quotes with longer expiration durations, we measure the price volatility of the trading pair over the desired quote period. This involves calculating the mean price, variance, and standard deviation and applying the calculated volatility as a slippage spread on the prices. A disclosed commission may also be applied that is separate from the applied spread.

ZHEU provides a single firm quote consisting of the order book price for the assets, the spread and all related costs/fees. The spread and related costs/fees are calculated as set out below under Spread.

Spread

For an RFQ quote, ZHEU incorporates a spread into the price quoted to End Customers based on the quote time duration. ZHEU applies a predefined spread parameter that will be used to adjust the ultimate price within the quote, based on slippage spread, asset volatility, time window, operational costs, affiliate costs, etc. The parameter is defined in basis points within a bandwidth (eg.100 - 400 bps) and the raw prices produced by ZHEU will be adjusted accordingly.

Buy quote price calculation
Adjusted Price = Best price from LP * ( 1 + ( spread / 10,000 ) )
Sell quote price calculation
Adjusted Price = Best price from LP * ( 1 - ( spread / 10,000 ) )

Example:

Spread: 200 bps
End Customer wishes to buy 0.5 BTC
End Customer transmits the request for a quote to ZHEU through the platform
ZHEU examines the order book
ZHEU sees that the best price for 0.5 BTC is $48,000
A spread is applied in accordance with the quote time-duration as set by ZHEU, adjusting the price of BTC to $48,960
ZHEU transmits that price to the End Customer through the front-end provided by the Platform Operator
A commission, either a fixed amount (e.g., $10 per trade) or percentage(e.g., 0.5% of the notional value of each trade) may be applied. Commission amounts will be negotiated between ZHEU and applicable Platform Operators
- For example, if ZHEU and the applicable Platform Operator institute a $10 per trade commission, the total cost of the 0.5 BTC transaction will be $48,970.
- Whereas, if the commission is 0.5%, the total price of the 0.5 BTC purchase would be $49,204.80.
- For a sell transaction, the commission will reduce the amount paid to you.
- Any commission amounts will be disclosed in the order screen prior to each applicable purchase or sale transaction.

Central Limit Order Book (CLOB)

The CLOB shares many characteristics with the RFQ system including:

LP’s populate an order book that is aggregated by ZHEU. ZHEU has multiple LP’s in order to provide quality pricing to End Customers as well to ensure redundancy and consistent trading availability.
The LP pricing orders are limit orders that populate both the bid and ask sides of the ZHEU orderbook. The identity of the individual LPs are not disclosed in the orderbook.
Order size does impact the ultimate price that the trade is executed at (on a buy or sell, larger orders that exceed the first pricing level quantity are typically filled at an average weighted price that is different from the first pricing level)

The key difference lies in the way that orders are sent. Please refer to the breakdown below:

Market Order

A market order is an instruction to buy or sell crypto assets immediately at the best available price. It guarantees execution within the ZHEU order book but not price, as the order will be filled at the prevailing market price at the time of execution.

Limit Order

A limit order is an order to buy or sell crypto at a specified price (or better). It ensures price certainty but does not guarantee execution if the market does not reach the specified price.Stop OrderA stop order becomes a market order when a specified price level is reached. It is typically used to limit losses or protect gains on a position by triggering a sale (or purchase) when the price moves against the End Customer’s position.

Stop-limit Order

A stop-limit order combines elements of a stop order and a limit order. It triggers a limit order to buy or sell crypto assets once the stop price is reached or breached. However, the execution is limited to the specified price or better, providing control over the price at which the order is executed after the stop price is triggered.

Price Time Priority

The CLOB matches orders whenever buyers' and sellers' orders overlap. Where there are multiple orders entered at the same price, the CLOB will implement its Price/Time priority algorithm aimed at prioritizing orders in a fair and objective way. Matching orders is prioritized based on 1) the best price, and then 2) the time in which those orders were submitted.

Process of trading on the CLOB

LPs submit intent to transact crypto assets to the CLOB as limit buy and or sell orders, specifying basic information such as prices, quantities, and direction of their intent (buy or sell).
The CLOB collects all of these active orders into an order book.
The CLOB then organizes and publishes the order book to all of its users.
In order to consummate a transaction, another party (an End Customer) must accept the prices and quantities available on the order book. The CLOB operator (ZHEU) matches the taker's acceptance with the corresponding orders in the order book that fulfill the taker’s order at the currently available best prices.
A commission, either a fixed amount (e.g., $10 per trade) or percentage (e.g., 0.5% of the notional value of each trade, may be applied. Commission amounts will be negotiated between ZHEU and applicable Platform Operators.
1. For example, if ZHEU and the applicable Platform Operator institute a $10 per trade commission, the total cost of the 0.5 BTC transaction executed at $48,960 will be $48,970.
2. Whereas, if the commission is 0.5%, the total price of a 0.5 BTC purchase executed at $48,960 would be $49,204.80.
3. For a sell transaction, the commission will reduce the amount paid to you.
4. Any commission amounts will be disclosed in the order screen prior to each applicable purchase or sale transaction.

Over-the Counter (OTC)

ZHEU will act as the principal and sole legal counterparty for all OTC transactions. Settlement may be performed by ZHEU or ZHLS as settlement provider. The purpose of this offering is to provide a tailored trading solution to meet specific client needs, often involving larger trades.

For OTC transactions, the same client onboarding rules apply, and the same trading pairs/ crypto assets are offered as for RFQ/CLOB trades.

ZHEU will only offer OTC services for crypto assets that ZHEU custodies and that have been approved by the Token Acceptance Committee.Not all of ZHEU approved assets are supported for liquidity.

Clients may contact ZHEU through several other channels if they wish to receive information or quotes for OTC transactions.

The client receives a price which is the LP price plus our spread. The client may either accept or reject.ZHEU does not offer a separate app or interface for OTC clients.

Buy/Sell/SwapFor each OTC crypto buy, crypto sell or crypto swap transaction, ZHEU will give a single and firm price to the client which includes all fees and spreads as agreed in the OTC agreement with the client. The firm price of ZHEU is based on the best price that ZHEU can get from an LP. Because ZHEU will base the firm price it quotes the client on a quote received from an LP and will fix the quote for a limited period of time, ZHEU incurs market risk for that duration.This OTC service is only offered in a non-programmatic way (not over API) and outside of the rules of the Trading Platform operated by ZHEU.

In all communication with the client (either a natural person or non-natural person), it will be made clear that the trade arrangement is OTC in nature. When it has been agreed by ZHEU and the client (counterparty) that a trade will be OTC, ZHEU will require that the client agrees to the ZHEU terms of the OTC trade.