Binance Closes Loophole in Lucrative VIP Fee Program, Impacting Prime Brokers
Binance is closing a loophole in its Link Plus program that has been profitable for prime brokers. Starting July 1, changes to the Link Plus interface will take effect. This program previously allowed prime brokerages to earn extra revenues by managing accounts for institutional clients and exploiting Binance’s fee structure.
A Binance spokesperson confirmed that several firms had used Link Plus to offer clients fee rebates that their trading volumes did not qualify for. This move will likely impact the revenue streams of many prime brokers, according to sources familiar with the matter.
Prime Brokers Used Binance’s VIP Fees for Extra Profits
The Link Plus interface allowed prime brokers to manage multiple sub-accounts, offering clients lower fees than they would normally receive. This was made possible by Binance’s nine-tiered fee structure. Prime brokers could achieve top-tier statuses, like VIP 9, by bundling accounts and trading at reduced fees.
Binance’s VIP 9 tier offers users who trade at least $4 billion per month fees as low as a tenth of those for regular customers. Prime brokers often reached this tier and then offered their clients lower-tier fees, keeping the difference. Binance has notified firms since last year about the changes to ensure transparency and fairness.
Binance’s New Rules End Fee Bundling for Prime Brokers
“Since last year we have notified companies on the Link Program that we will implement enhanced compliance standards and changes to align our fee structure for Link end-users to ensure transparency and fairness,”
said a Binance spokesperson in an emailed statement.
The upcoming changes will link clients directly to the tier status their trading volumes qualify them for, removing the ability to bundle accounts. This will likely cause many prime brokers to lose their top-tier status, affecting their ability to offer attractive commissions to clients.
Bequant Shifts Focus Due to Binance Fee Changes
Bequant, a crypto trading firm based in Malta, is shifting its focus to principal trading due to the changes in Binance’s fee structure. George Zarya, Bequant’s CEO, said in an interview that their prime business was heavily reliant on arbitraging Binance’s fee tiers.
Binance has also stated it will restrict the misuse of account features that give some users an advantage on the platform. Although this push is not directly related to the overhaul of Link Plus, it reflects Binance’s effort to maintain compliance and fairness.
Binance’s Legal Troubles and Compliance Measures
In November, Binance pleaded guilty to violating US anti-money-laundering and sanctions laws. The company agreed to pay a $4.3 billion penalty, and co-founder Changpeng Zhao stepped down as CEO. He later receiving a four-month prison sentence.
Following the plea deal, Binance has tightened listing requirements for new tokens. It has taken steps to prevent US investors from trading on its platform, and spun off its venture capital arm. US regulators have appointed two monitors, Sullivan & Cromwell and Forensic Risk Alliance, to oversee compliance at the firm.
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