Aggregation is here to stay, say technology providers
FX Week, November 2012 – Aggregation technology is the best way to manage the increasingly fragmented foreign exchange trading landscape, and banks need to have such tools at their disposal if they don’t have adequate in-house technology, according to speakers at the FX Week Europe conference in London.
Citing a survey of second- and thirdtier banks carried out by his sales team, Hormoz Amir Faryar, senior sales manager at Abu Dhabi-based brokerage ADS Securities, said the vast majority of firms are looking to aggregation to manage the challenges posed by the multitude of trading venues.
“Everyone more or less is heading towards aggregation tools – I’m sure that could change, but that’s where we’re heading at the moment. Aggregation isn’t done yet; there is still a lot going on in that field. There have been more startups in this area recently and the reason they are there is because there is a market for it,” said Faryar.
Despite the proliferation of trading platforms in recent years, and the multitude of channels through which FX can now be traded, David Mercer, chief executive of LMAX Exchange, predicted spot FX would move entirely to an exchange-based model over the next 10 years.
“Spot FX trades 50 times the volume of the New York Stock Exchange every day – we don’t need dark pools; we don’t need this opaque over-the-counter marketplace; liquidity providers don’t need last look. Surely a level playing field, with the ability for everyone to access that level playing field on an open order book, like they’ve done in every other asset class, is the way forward? Fight it all you like, and create dark pools in the short term, but platforms you see now will be exchange-based in a decade,” said Mercer.
Other panellists were sceptical of Mercer’s prediction. “Banks are getting much more efficient at market-making to different client segments, so they’ll tend to put in separate liquidity streams where they may get much tighter spreads than you’d get on an exchange. So we’re seeing not just fragmentation in terms of venues, but fragmentation in terms of liquidity streams to established liquidity providers, and that’s where aggregation is key. Although I like the exchange model, the reality is that there’s just more fragmentation going on,” said Peter Atkinson, head of FX product management at SmartTrade Technologies.
Meanwhile, Yaacov Heidingsfeld, chief executive of liquidity management technology provider TraderTools, argued there would continue to be demand for both transparent and opaque trading venues, also known as dark and lit liquidity pools.
“I do believe there is demand in the marketplace for both lit and dark pools, and to the extent liquidity redistributors are able to provide the liquidity providers with a look into the kind of business they’re doing, they’re going to get improved pricing and be able to compete more effectively for their customers,” said Heidingsfeld.
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LMAX Exchange (London):
Barbara Pozdorovkina T: +44 20 3192 2510 E: [email protected]
About LMAX Exchange
LMAX Exchange Group is a dynamic, visionary and award-winning financial technology company. Recognised as one of the UK’s fastest growing technology firms, LMAX Exchange is leading the transformation of the global FX industry to transparent, fair, precise and consistent execution. Operating one global marketplace for trading FX, metals, indices and commodities, LMAX Exchange delivers open access, transparency and a level playing field to all market participants.
LMAX Exchange Group offers all clients the ability to trade on LMAX Exchange central limit order book, driven by streaming no ‘last look’ limit-order liquidity from top tier banks and non-bank financial institutions. Servicing funds, banks, brokerages, asset managers and proprietary trading firms, LMAX Exchange offers an anonymous, regulated, rules-based trading environment, order execution in strict price/time priority, and access to real-time streaming market and trade data, enabling all market participants to control execution quality and total trading costs.
Offering a comprehensive range of instruments and ultra-low latency execution, LMAX Exchange operates a global FX exchange infrastructure with matching engines in London, New York and Tokyo.
LMAX Exchange - a unique vision for global FX.
Financial technology awards:
2017 Best FX Trading Venue - (ECN/MTF) – Fund Technology and WSL Awards more
2016 Best Trading & Execution Technology – HFM US Technology Awards more
2013 Best Overall Testing Project – The European Software Testing Awards more
2011 Best Trading System – Financial Sector Technology Awards more
FX industry awards:
2018, 2017, 2013 Best Execution Venue – Forex Magnates Awards more
2017, 2016, 2015, 2014, 2013 Best FX Trading Venue - (ECN/MTF) – WSL Awards more
2017, 2016, 2015, 2014, 2013 Best Margin Sector Platform – Profit & Loss Readers' Choice Awards more
2014 Best Infrastructure/Technology Initiative – WSL Institutional Trading Awardsmore
Business growth awards:
2016, 2015 Winner – Deloitte UK Technology Fast 50 more
2016, 2015 Winner – Deloitte EMEA Technology Fast 500 more
2015, 2014, 2013 Fastest Growing Tech Company in the UK – The Sunday Times Tech Track 100 more
LMAX Exchange Group is the holding company of LMAX Limited and LMAX Broker Limited.
LMAX Exchange is a trading name of LMAX Limited, which operates a multilateral trading facility, authorised and regulated by the Financial Conduct Authority (firm reference number 509778) and is a company registered in England and Wales (number 6505809).
LMAX Global is a trading name of LMAX Broker Limited which is authorised and regulated by the Financial Conduct Authority (firm reference number 783200) and is a company registered in England and Wales (number 10819525).