FX Week, October 2013 - Officials at EBS, LMAX Exchange and State Street Global Exchange debate key issues facing new and incumbent platforms during a live webinar.
Management of costs, speed, pricing practices and trading behaviour are some of the most challenging and divisive issues facing foreign exchange trading platforms, according to participants in a live webinar hosted by FX Week last week.
During an hour-long panel on October 17, senior officials at EBS, Currenex and LMAX Exchange debated the impact of changing trading behaviour, depressed volatility and the launch of new platforms on their businesses. Addressing the fixed costs charged to market participants, David Mercer, London-based chief executive officer of LMAX Exchange, warned some platforms are charging too much for market data.
“What is apparent in the rest of the marketplace is the charge for market data can create unfairness and can be too high. The cost of market data is nowhere near as high as some people pay, and you can look at the larger futures exchanges to see what the real cost of market data is. I’m not looking for market data to be a source of revenue generation for us going forward,” said Mercer.
Banks have been calling for changes to cost structures on major platforms for some time, with many participants arguing the fixed costs are too high and there is insufficient transparency around brokerage fees and volume discounts. Jeff Ward, global head of EBS Direct in London, confirmed EBS is reviewing its cost structure.
“The fixed costs for EBS have traditionally been an area of revenue,” he said. “We are very much looking at what pricing does from a strategy perspective. It’s possible we will change – we are very heavily involved in this process. It’s not always easy and there are different business models. We will have to gauge what that study concludes.”
Meanwhile, David Newns, chief operating officer for trading and clearing at State Street Global Exchange, agreed with Mercer that charging large amounts for market data doesn’t make sense. “We do charge people in different ways for different things, but the basic real-time fixed market data feed we provide is essentially free, as long as you’re doing some trading. From that perspective, that’s significantly lower than the historical costs of accessing market data.”
Another area of debate was the use of a randomised pause applied to orders to prevent latency arbitrage – a measure that, in slightly varying forms, is central to start-up platform ParFX and has also been recently applied to AUD/USD and USD/ CHF on EBS, with plans to roll it out to other pairs. While relatively simple in technology terms, the measure has drawn fierce criticism from some platforms.
“It’s an extra level of complexity in what is already a relatively complex marketplace. I’d agree you don’t want to get into nanoseconds, but I think it’s too early for latency floors. In all of our venues, no-one has yet asked for randomisation. When banks want to get done, they don’t want to be randomised, they want to hit the price as quickly as possible,” said Mercer.
EBS’s Ward responded that it is too early to draw definitive conclusions but the latency floor is working as intended. “Latency and certainty of execution are extremely important – there is no doubt about it – but not at the expense of a healthy ecology on the platform. It has certainly not been a trivial change from a decision-making perspective,” he said.
For further information please contact:
LMAX Exchange (London):
Barbara Pozdorovkina T: +44 20 3192 2510 E: firstname.lastname@example.org
About LMAX Exchange
Recognised as one of the UK’s fastest growing technology firms, LMAX Exchange is the leading MTF for FX, authorised and regulated by the FCA. Servicing funds, banks, brokerages and asset managers, LMAX Exchange delivers firm liquidity, anonymous exchange quality execution and a secure, transparent level playing field to all market participants, regardless of status, size or activity levels.
The LMAX Exchange open order book is driven by no ‘last look’ limit-order liquidity from top tier banks and non-bank financial institutions. Orders are executed in price/time priority with real time streaming continuous market and trade data published to all members. Offering a comprehensive range of instruments including spot FX, precious metals, commodities and equity indices, 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.
Business growth awards:
2016, 2015 Winner – Deloitte UK Technology Fast 50 more
Deloitte UK Technology Fast 50 is a ranking of the 50 fastest-growing technology companies in the UK, based on percentage growth of fiscal year revenues over the last four years. close
2015, 2014, 2013 Fastest Growing Tech Company in the UK – The Sunday Times Tech Track 100 more
LMAX Exchange has been recognised amongst the UK’s fastest growing technology firms for three consecutive years. Tech Track 100, compiled by Fast Track annually and published by the Sunday Times each September, lists Britain’s 100 fastest-growing private tech companies based on sales growth over the last three years. close
2016, 2015 Winner – Deloitte EMEA Technology Fast 500 more
The Deloitte EMEA Technology Fast 500 pre-eminent technology awards program is a ranking of Europe, the Middle East, and Africa's fastest-growing technology companies based on percentage revenue growth over three years. close
FX industry awards:
2017, 2016, 2015, 2014, 2013 Best FX Trading Venue - (ECN/MTF) – Fund Technology and WSL Awards more
LMAX Exchange has been awarded The Fund Technology and WSL Awards “Best FX Trading Venue - ECN/MTF” for five consecutive years. The awards honour excellence among providers to the institutional trading industry. close
2016, 2015, 2014, 2013 Best Margin Sector Platform – Profit & Loss Readers' Choice Awards more
LMAX Exchange has been awarded The Profit & Loss Readers’ Choice Awards “Best Margin Sector Platform” for four consecutive years. These awards are voted on by the readers and recognise excellence within the foreign exchange industry throughout the previous year. close
2014 Best Infrastructure/Technology Initiative – WSL Institutional Trading Awards more
LMAX Exchange has been awarded The Wall Street Letter Institutional Trading Awards “Best Infrastructure/Technology Initiative” in 2014. WSL awards honour excellence among providers to the institutional trading industry. close
Financial technology awards:
2016 Best Trading & Execution – HFM US Technology Awards more
The HFM US Technology awards recognise hedge fund technology providers that have demonstrated exceptional customer service and innovative product development in the past 12 months. close
2013 Best Overall Testing Project – The European Software Testing Awards more
2011 Best Trading System – Financial Sector Technology Awards more
The FST Awards recognise excellence and innovation in the field of information technology within the UK and EMEA financial services sector. close
LMAX Limited operates a multilateral trading facility (MTF). Authorised and regulated by the Financial Conduct Authority, FCA Registered no. 509778.