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LMAX Exchange blog - FX industry thought leadership

All the latest business and technology views and insights on the FX industry from LMAX Exchange management and staff

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Business and Technology

This year at LMAX Exchange we asked our world leading Liquidity Providers to create an even tighter top of the book stream for our brokerage clients.

Averaging 0.14 this month our spreads are the tightest they’ve ever been and arguably the most competitive on the street.

BUT – we also agree with those that say – Tight Spreads – so what?

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Video commentary by David Mercer, LMAX Exchange CEO

Spread is just one of the metrics you need [...]

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One of the key metrics you need to consider in your choice of liquidity and transaction cost analysis, is market impact. Or put simply, the effect your trading has on the wider market post trade. Rather simplistically you are told that, if the market moves a lot in reaction to your trading, then that’s a bad thing and you pay wider spreads with a high cost of rejection and higher response times.

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Video commentary by David Mercer, LMAX [...]

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Previously on Jurassic FX we looked at ‘Prehedgeosaurus’. Now we are going to take a closer look at ‘Lastlookosaurus’.

And so on to our old pal Lastlookosaurus who makes his glorious last stand in Principle 17. A nirvanic world where ‘last look’ is transparent and clients have the use of ‘last look’ disclosed. Yes this is the same beast that cast its shadow over most of the scandals in the last few years. The same beast currently at the centre of a well publicised US case against a large bank and the same beast who’s abuse was highlighted in the [...]

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Welcome to the world of Jurassic FX. In this ancient land the new ruler is the Global Code of Conduct where the last 2 great beasts of a dying breed seek to preserve their territory. These 2 beasts go by the name of:

  • Prehedgeosaurus – otherwise known as Principle 11
  • Lastlookosaurus – otherwise known as Principle 17

Let’s examine Prehedgeosurus first. He knows pre-hedging is it in itself a misnomer. But he must retain this legitimised front-running ability. Fast forward to Annex 1 with rose tinted examples of bygone days, when the hedge happens before the client trades [...]

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This week we’ve seen a lot in the process about the global code of conduct and a lot of the issues that we raise within that. Guy Debelle, who is the chair of the FX working group charged with issuing the code of conduct, welcomed concerns to be raised from the market. I met Guy 14 months ago, and our concerns are the same, it appears the global code will allow last look, and it appears that pre-trade hedging, will be permissible, as long as they’re disclosed to the client. Put simply, it’s impossible for any client to understand all the disclosures, from all the different market participants around this opaque practice, it is impossible.

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Today we’re going to talk about price improvements or positive slippage. We’re all very well aware of negative slippage, but too often as a client we’re not benefitting from price improvements. On LMAX Exchange, or indeed on any central limited order book, it’s natural if you fire in a market order, that occasionally you’re going to miss that price, and get negative slippage, and other cases you get positive slippage. On LMAX Exchange last year, about 93% of market orders were filled at the price the client aimed for, 4.5% suffered from negative slippage and 2.5% benefited from price improvement. That shows a natural market bias where, the trend is your friend and clients in the market are generally moving in one direction, so unfortunately, there is always a bias towards negative slippage.

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2017 is set to be an interesting year, first of all framed by the volatility we should expect given the new style of presidency in the US, given the known unknowns in Europe, with the Brexit situation and further afield, the upcoming elections in the Netherlands, Italy and France. That should be good for volatility traders, good for exchanges and hopefully good for our clients. And under that macro view we have something very important happening in the FX market, people are now questioning the existing market structure, and the status quo that has existed for some time. And, we have the global code of conduct coming in May.

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LMAX Exchange CEO, shares his views at the FX Week Europe 2016 conference panel ‘Liquidity under the microscope’: Is the rise of non-bank market makers creating a more liquid, transparent, efficient FX market, raising the bar and improving technology? The panel focused on discussing the differences and similarities between ‘bank’ vs ‘non-bank’ liquidity as well as the criteria that the market participants use to assess execution quality and costs, such as last look vs firm liquidity, fill ratios, reject rate. The panel concluded with each participant’s perceived views on the expected market changes in 2017.

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This is a guest post for the Computer Weekly Developer Network blog ‘penned’ by Dr. Andy Phillips in his role as director of technical operations at LMAX Exchange — the company is a specialist in technology that facilitates the FX trading strategies of both buy-side & sell-side trading institutions.

C-suite headaches

It’s the question that keeps C-level execs awake at night: how do they attract and retain the best talent? To become best in class, you need the best people and that has become an ever-tougher task in the highly competitive world of tech talent.

No longer are the stock options, pool tables, free meals and beanbags enough to set you apart from the crowd. For star developers, there are plenty of good financial offers on the table too, so pay packets alone won’t necessarily seal the deal, especially among those who are most motivated by the technical quality of their working environment and peers.

City-chic is waining

Finance sector companies in particular, who may have relied on brand recognition and big paychecks to attract the best talent are now competing with companies that did not exist a decade ago. It’s no longer cool to work in the City compared to being part of a fintech startup in Clerkenwell trying to disrupt traditional finance. For more career risk averse developers, Internet giants like Facebook or Google have as much or more attraction than the giants of Wall Street.

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Any opinions, news, research, analyses, prices or other information ("information") contained on this Blog, constitutes marketing communication and it has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Further, the information contained within this Blog does not contain (and should not be construed as containing) investment advice or an investment recommendation, or an offer of, or solicitation for, a transaction in any financial instrument. LMAX Exchange has not verified the accuracy or basis-in-fact of any claim or statement made by any third parties as comments for every Blog entry.

LMAX Exchange will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. No representation or warranty is given as to the accuracy or completeness of the above information. While the produced information was obtained from sources deemed to be reliable, LMAX Exchange does not provide any guarantees about the reliability of such sources. Consequently any person acting on it does so entirely at his or her own risk. It is not a place to slander, use unacceptable language or to promote LMAX Exchange or any other FX, Spread Betting and CFD provider and any such postings, excessive or unjust comments and attacks will not be allowed and will be removed from the site immediately.

LMAX Exchange will clearly identify and mark any content it publishes or that is approved by LMAX Exchange.

FX and CFDs are leveraged products that can result in losses exceeding your deposit. They are not suitable for everyone so please ensure you fully understand the risks involved. The information on this website is not directed at residents of the United States of America, Australia (we will only deal with Australian clients who are "wholesale clients" as defined under the Corporations Act 2001), Canada (although we may deal with Canadian residents who meet the "Permitted Client" criteria), Singapore or any other jurisdiction where FX trading and/or CFD trading is restricted or prohibited by local laws or regulations.

LMAX Limited operates a multilateral trading facility. LMAX Limited is authorised and regulated by the Financial Conduct Authority (firm registration number 509778) and is a company registered in England and Wales (number 6505809). Our registered address is Yellow Building, 1A Nicholas Road, London, W11 4AN.

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