The CLOB: Crypto Exchanges Turning Retail Traders into exit liquidity
In the world of cryptocurrency trading, the Central Limit Order Book (CLOB) has long been the dominant execution model.
While effective in traditional financial markets, the CLOB structure presents inherent disadvantages for retail traders when applied to cryptocurrencies trading.
Ouinex, a new crypto and derivatives trading platform, is taking a bold step forward with an innovative no-CLOB execution model designed to level the playing field.
A recent incident involving Binance, a leading cryptocurrency exchange, underscores the challenges of implementing the CLOB model in the largely unregulated crypto market, often (if not always) to the detriment of retail traders.
On March 9, 2025, Binance offboarded a market maker for misconduct related to GoPlus Security (GPS) and MyShell (SHELL) tokens (official announcement here). The market maker was caught engaging in manipulative practices, likely spoofing—placing large fake orders to mislead traders and then canceling them before execution. This is yet another clear example of why CLOB fails in unregulated crypto markets and retail traders become exit liquidity for institutions
Ilies Larbi, CEO of Ouinex, states:
“Binance’s ‘market maker rules’ are just four bullet points. In TradFi, rulebooks are hundreds of pages long to prevent manipulation and if caught, jail can be what you are looking at next; not a simple ban from the exchange. This shows how unregulated crypto really is, and by allowing Market Makers “take” prices, it is making crypto CLOBs an unfair environement for retail traders.”
Binance’s guidelines for market makers—simply maintaining bid/ask orders, preventing excessive cancellations, and ensuring liquidity—are laughably weak compared to the hundreds of pages of strict regulations in TradFi CLOB environments. This latest event reinforces the need for a level playing field to protect retail traders from institutional exploitation.
Why the CLOB Model Puts Retail Traders at a Disadvantage
According to Ouinex CEO Ilies Larbi, the application of CLOB in crypto markets creates a trading environment where institutional players hold a distinct advantage over retail traders.
“Using the CLOB model for crypto and derivatives trading is nonsense,” Larbi asserts. “In traditional markets like the NYSE, institutions compete against each other within a regulated environment, and the CLOB works brilliantly. In crypto, however, institutions and retail traders are mixed together, in a fully unregulated market which creates a deeply unfair environment. It’s like putting fish in a tank with sharks”.
The disadvantages stem from several key issues:
– Speed and execution disparities – Institutional traders leverage superior infrastructure and low-latency connections, allowing them to execute trades ahead of retail participants.
– Market manipulation tactics – Practices such as spoofing, layering, and stop hunting allow institutions to exploit retail order flow.
– Liquidity fragmentation – Unlike centralized stock markets, crypto liquidity is spread across multiple exchanges, resulting in wider spreads, arbitrage gaps and inconsistent execution quality.
– Asymmetric slippage (negative-only slippage) – Typically slippage can be both positive and negative. However, in crypto CLOB models, slippage is always negative for retail traders because institutions are first in line to execute trades at optimal prices, leaving retail traders with only the leftovers.
“Retail traders should not have to accept asymmetric slippage as the norm,” Larbi emphasizes. “Sometimes slippage works in your favor. But in crypto, the way CLOBs are set up ensures that institutions snap up the best prices first, leaving retail traders with only negative slippage. This is another way institutions profit at the expense of retail traders.”
Ouinex’s No-CLOB Execution Model: A Fairer Alternative
To counteract these issues, Ouinex has developed a “no-CLOB execution model” that separates institutional market-making from retail trading while ensuring a competitive price discovery process.
“We’ve designed a model where institutional participants only make prices, not take them,” Larbi explains. “They compete against each other to provide the best bid and ask prices, which are then passed on to retail traders. However, institutional traders have no visibility nor can they trade into the order book, ensuring they cannot take advantage of retail order flow with unfair practices. This creates a much fairer execution environment.”
This innovative approach eliminates many of the conflicts of interest present in current crypto exchanges and brings several advantages:
– Tighter spreads and better execution – With institutions competing against each other, retail traders receive more favorable pricing, and institutions are incentivized to price tighter to win retail order flow.
– Passing on positive slippage and avoiding market manipulation – The lack of visibility into retail orders prevents front-running and unfair trading practices.
– Improved market transparency – The execution model is designed to prioritize fair trading conditions over institutional advantages.
To enhance execution quality, Ouinex has partnered with **CROSSx**, a next-generation **Electronic Communication Network (ECN)** for crypto trading, operated by Crossover Markets. This integration enables Ouinex to offer institutions and retail traders the same level of execution efficiency that firms like FastMatch brought to FX trading.
Beyond Execution: Ouinex’s Multi-Asset Trading Model
Ouinex’s innovation extends beyond execution fairness. The platform also introduces a cross-margining tool, allowing traders to use crypto assets as collateral for margin-based products without having to convert them to fiat. This makes Ouinex the first exchange to offer both TradFi derivatives and spot crypto trading, along with perpetual contracts, from a single and unique trading interface.
A New Standard for Crypto Trading?
With **Ouinex set to go live in the coming weeks, the industry will soon see whether this new execution model will challenge the status quo and offer retail traders a fairer, more transparent trading experience.