Are Connectivity Options Limiting your Choice of Liquidity Providers?

LMAX Exchange

So you need a liquidity provider? Your team has been approached by numerous LPs all pretty much offering the same commercial deal, so how do you choose? Let’s say you go down the path with one particular LP and after some tough negotiations you reach a commercial agreement you are both satisfied with. Now it is time to do the actual technical integration to take their liquidity and connect to your margin account for trade processing. Shortly after this point, your engineers come back to you with a problem. A rather huge problem…

….it turns out that the integration methods/tools that are on offer from this new LP are not compatible with your system requirements or are outside the skill sets of your engineers. Everything goes on hold as you try to come to grips with the time wasted and start scrambling around for alternative methods of connectivity to make this effort work or decide whether to bin it and move to another LP altogether.

There are 2 ways of looking at your connection to an LP;

  • the network connection
  • the software connection

Both are equally important and can make or break your experience. In the Equities, Fixed Income and Futures markets it is all about the speed of your connection to the exchange. Because of the maturity of these markets, the actual speed of execution is taken for granted and all focus is given to making the connection to the exchange the fastest and most reliable. The software is very uniform in these mature markets and so is similarly just taken for granted and not given much attention. To address this need, most Equities and Futures exchanges offer co-location as well as cross-connections to allow their customers to be connected directly to the exchange via physical cables. This close proximity will allow for reliable low latency connections into the exchange liquidity. As well as providing co-location and cross-connection, all these mature exchanges are connected to private Extranet networks or Managed Network Providers and also make these available to their partners/customers.

Currently, the LMAX Exchange servers are located in the Equinix data center in London but because of rapidly increasing demand we are exploring new venue offerings in both Asia and North America. The primary connection method to the LMAX Exchange execution venue is through the Internet but in order to provide our partners/customers with a more mature experience similar to that of the other markets, LMAX Exchange provides access to Managed Network Providers/Extranets. LMAX Exchange is integrated and connected with numerous Managed Network Providers who give a stable, reliable and low latency connection into the execution venue for their clients.

LMAX Exchange operates three separate execution venues (LMAX Professional, LMAX Institutional and LMAX Interbank), each suited to specific client segments and their corresponding requirements. The access methods available for each venue are as follows:

  • LMAX Professional and LMAX Institutional: FIX 4.4, API (Java, .Net), Web GUI
  • LMAX Interbank: FIX 4.2, GUI

What differentiates the LMAX Professional offering is that anyone can use these connectivity methods to get direct market access (DMA) to their LMAX Exchange margin account, get live market data, retrieve historical market data and of course to trade. From Tier 1 Banks to Individual investors, these software libraries/protocols are readily available and fully supported by dedicated technical account managers at LMAX Exchange. The majority of our institutional partners use FIX to connect, take market data and enable straight through processing (STP) for their clients. Some of our institutional partners as well as some Independent Software Providers (ISV) use a combination of FIX Protocol and Java/.NET (these are wrappers around the LMAX Exchange HTTP REST Protocol) to provide a more customised experience for their users. Of course, a few of our partners rely solely on the creativity of the LMAX Exchange Java or .NET wrappers to deliver a unique experience to their end users.

Integration to the LMAX Exchange is made very simple and efficient. After the initial sales contact, the client is introduced to a dedicated Technical Account Manager. This Integration specialist will stay with the client through the entire onboarding including testing and conformance testing to going live. This Technical Manager is then available post-onboarding for the life of the account and becomes a single point of contact for any new client.

Another differentiator for the LMAX Exchange’s connectivity options, is that you don’t need to customise our FIX 4.4 Protocol. Many liquidity providers support FIX Protocol, but because of their limited resources or because they are in a rush to make a protocol available, they tend to try to bundle everything into one solution. This results in complicated integrations for clients and partners and can take significantly longer to implement. LMAX Exchange made a conscious decision not to customise its FIX 4.4 Protocol. This was an easy decision as it was in line with the LMAX Exchange attitude of making integrations simpler for users of our execution venue. The ease of integration to a vanilla Protocol also means less effort wasted and less resources burned. This has led to some integrations being completed within a day but all have been simple in their implementations easing the load on resources for the partners.

Much has been written of the LMAX Exchange technology and rightly so, but one of the overlooked developments was the release of our API libraries (Java and .NET) that sit on top of this brilliant technology. These wrappers provide an asynchronous method of delivery that is extremely efficient and consequently extremely fast. Many ISVs use these libraries to customise their offerings and some Institutional partners use the flexibility of these APIs to build their own GUIs to distribute to their clients.

So, when you choose the LMAX Exchange as your LP you can be guaranteed that whether your resources/engineers are Java programmers or .NET programmers or FIX Protocol experts, their integration tasks will be made much easier because of the flexibility that LMAX Exchange provides as well as the dedicated Integration specialists (Technical Account Managers) provided to LMAX Exchange clients. This removes the technical challenge from the commercial discussion and allows you to focus more sharply on the business.

Business and Technology   Foreign Exchange   LMAX Exchange  

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