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FX platforms divided on management of costs and speed

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.

Changing dynamics in FX tradingManagement 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.

Click here to watch the webinar highlights

Click here to watch the full 60 minutes webinar

Download as a PDF –

Media Contacts

For further information please contact:

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

LMAX Exchange has been awarded The Fund Technology and WSL Awards “Best FX Trading Venue - ECN/MTF”. The award honours excellence among providers to the institutional trading industry. close

2016 Best Trading & Execution Technology – 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

The European Software Testing Awards (TESTA) recognise excellence and innovation in the software testing and quality assurance across a variety of industries. close

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

2011 Innovative Programming Framework – Oracle Duke's Choice Awards more

Oracle’s Duke's Choice Awards celebrate extreme innovation in the world of Java technology and are granted to the most innovative projects using the Java platform. close

FX industry awards:

2017, 2016, 2015, 2014, 2013 Best FX Trading Venue - (ECN/MTF) – WSL Awards more

LMAX Exchange has been awarded The WSL Awards “Best FX Trading Venue - ECN/MTF” for four consecutive years. The awards honour excellence among providers to the institutional trading industry. close

2017, 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 five consecutive years. These awards are voted on by the readers and recognise excellence within the foreign exchange industry throughout the previous year. close

2017, 2013 Best Execution Venue – Forex Magnates Awards more

LMAX Exchange has been awarded the Forex Magnates Awards “Best Execution Venue”. The awards are granted to the top firms in their categories and announced at the annual London summit. close

2014 Best Infrastructure/Technology Initiative – WSL Institutional Trading Awardsmore

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

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

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

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

2015 Recognised as a Tech City Future Fifty company – Tech City UK Future Fiftymore

LMAX Exchange is part of the Future Fifty programme, focused on accelerating the success of high-growth tech businesses. close

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).