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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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It’s all about the Spread……… or is it?

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 to assess when choosing your liquidity as a client and particularly a brokerage client:

You also need to know:

Fill rates – using market orders as most brokers do, you’ll achieve a perfect 100% fill rate on LMAX Exchange – something you won’t see with ‘Last Look’ liquidity

  • Zero cost of hold time – opportunity cost
  • Zero cost of rejection – estimated at an average of $25/m if you are held for 100ms with last look
  • Up to $300/m of price improvement but averaging $10/m in 2016
  • Finally you should look at your market impact post trade but frankly when your flow looks like THIS

    The typical broker flow, there is very little market impact and you should expect only the tightest spreads

So… in summary – Spread is important – that’s why we’ve brought you better prices this year, BUT you need to be able to measure your Total Cost of Trading.

We are confident your total cost of trading will be lower on firm, LMAX Exchange limit order liquidity.

And with the upcoming Global Code of Conduct about to launch with an underlying message of greater transparency, you NEED to have firm liquidity in your armoury, to show your customers that you provide them with access to only the best and fairest liquidity in the marketplace.

If you are still not convinced please feel free to ask us directly – email brokers@lmax.com

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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