LMAX Exchange: Game Changer?

Best Execution, January 2013 – London-based LMAX Exchange, the leading FSA regulated MTF for FX and metals, aims to bring market participants together in an anonymous, order-driven, and fully transparent manner. Best Execution asked David Mercer* what impact his business model has on delivering best execution in FX trading and to what degree this strategy anticipates future regulatory changes.

MiFID I attempted to define “best execution” for the equities market, but MiFID II failed to develop it further. In this context, what are the key differences between these two asset classes, and how would you define best execution in FX?

FX is the last major asset class to move to exchange trading. The regulatory proposals, such as MiFID II and Dodd Frank, are driving this change by requiring pre- and post-trade transparency and centralised clearing for standard FX derivatives.

LMAX Exchange is the leading FSA regulated MTF for FX and metals. It was established based on the vision that the exchange execution model is the most efficient and cost effective way to trade liquid products, such as spot FX. The exchange execution model is at the core of an MTF concept; just as on an exchange, orders are matched in price/time priority but trading is still bi-lateral with FX trades cleared through the prime broker network.

By offering an exchange style execution for spot FX, we address key industry challenges such as the lack of transparency of the true cost of OTC traded FX, and the lack of precise, consistent & reliable execution in FX trading.

How does your business model aim to achieve best execution, and can this be improved upon?

In the context of a single platform we achieve best execution for spot FX by delivering precise, consistent execution, pre- and post-trade transparency and a level playing field for all market participants. Unlike brokers, we don’t run risk to make money but just match orders, and we are different from ECNs in that the execution is order-driven against streamed, executable limit orders supplied by the general members, who don’t have the “last look” and ability to re-quote.

In addition, as an FSA regulated MTF, LMAX Exchange complies with the following MiFID obligations:

• transparency – deals are published to all members;
• and applied consistently across all members;
• membership rules are described in the publicly available rulebook.

Given the competitiveness of the FX market and increasing fragmentation of liquidity, we focus on continuously improving the trading experience for both clients and liquidity providers. We invest in technology to further improve execution performance and increase liquidity by adding new general members.

You have been quoted as saying that your greatest strength is technology, and that you employ “disruptive” technology. What exactly do you mean by disruptive technology and what is the competitive edge it confers?

Our technology enables reliable, ultra-low latency execution. To date, we have the fastest FX trading technology with an average trade latency of under 3 milliseconds and internal exchange latency of 500 microseconds. In-house developed ‘Disruptor’ technology, partially Open Source, refers to our ultra-low latency matching engine that has been developed to maximise performance and has been recognised by the industry’s most prestigious awards – ‘Best Trading System’ at the Financial Sector Technology (FST) Awards and Oracle’s ‘Duke’s Choice’ Innovative Programming Framework award.

The buyside have traditionally not been early adopters of new technology or new platforms. How do you intend to win them over to your offering?

We only started focusing on the institutional FX segment a year ago and now over 50% of volumes are traded by buyside institutions – represented by proprietary trading firms, money managers and broker dealers hedging risk. These volumes are rising every month. Yes, it takes longer to get institutional buyside clients on-board, but once they start trading they stay because of the transparency, precision, consistency in execution and low latency that the platform delivers. The proof is our growth momentum in the industry – for the last 12 months our overall volumes and revenues have been growing consistently at over 20% per month.

Is your business model capable of stimulating demand from the buyside, and if so how?

Absolutely. New buyside relationships can be acquired directly, or through independent corporate brokers/agents, who advise buyside clients on best execution.

Your current structure would allow you to apply to be an SEF (Swap Execution Facility in the USA) or OTF (Organised Trading Facility in Europe). Is this where you expect the regulations to take you, and if so over what time frame?

Among FX products we currently offers only spot FX, which are out of scope for Dodd-Frank and MiFID II. However, if we were to offer non-spot FX, such as FX swaps and non-deliverable forward (NDF), we can apply to become a SEF in the US. If we pursue the strategy of product diversification, this is something that we may consider.

What opportunities do you see in becoming and SEF/OTF?

The opportunity is big. In my understanding more than half of the total US$4.4 trillion in FX daily trading volumes is subject to Dodd-Frank and MiFID II.

Over the next five years, what other regulatory changes do you foresee?

We see a gradual move to exchange style execution, central clearing and greater transparency.

Where do you see LMAX Exchange in five years time?

Our goal is to become the leading FX venue with a global presence and multiple exchanges.

*David Mercer, is CEO of LMAX Exchange. LMAX Exchange is the leading FSA regulated MTF for spot FX.

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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.

2024

Best Execution Venue – Finance Magnates Awardsmore

LMAX Group has been awarded Best Execution Venue for the fourth consecutive year by Finance Magnates at its annual London Summit Awards ceremony. The awards highlight leading participants in the industry as voted for by peers.close

Best Cryptocurrency Exchange – Finance Magnates Awardsmore

LMAX Digital has been awarded Best Cryptocurrency Exchange for 2024 by Finance Magnates at its annual London Summit Awards ceremony. The awards highlight leading participants within the crypto space as voted for by industry peers.close

The World’s Best Trading Firm for FX Liquidity – Euromoney Foreign Exchange Awardsmore

LMAX Exchange has been awarded The World’s Best Trading Firm for FX Liquidity at the Euromoney Foreign Exchange Awards 2024. Judged by a panel of global experts, the awards celebrate excellence and innovation in the global FX market. close

Application Performance – Speeds & Feeds – Azul Java Hero Awardmore

LMAX Group has been selected as the winner of the 2024 Azul Java Hero Award: Excellence in Application Performance – Speeds & Feeds. The awards recognise individuals and organisations that demand more, expect more, and get more from Java. close

Exchange of the Year – Hedgeweek Global Digital Assets Awardsmore

LMAX Digital has been awarded Exchange of the Year at the Hedgeweek Global Digital Assets Awards 2024. The awards recognise excellence in the fields of fund performance and service provision in the digital assets space. Voted on by participants in the financial services industry. close

2023

40 Top Innovators in Financial Markets – TabbFORUMmore

LMAX Group CEO, David Mercer has been named, for the second year running in the TabbFORUM 40 Top Innovators in Financial Markets. This second annual list recognises the achievements and influence of 40 outstanding disruptors and difference-makers having the greatest impact at the intersection of finance and technology. close

Best Execution Venue – Finance Magnates Awardsmore

LMAX Group has been awarded Best Execution Venue for 2023 by Finance Magnates at its London Summit Awards ceremony. The awards spotlight and garner attention for leading participants that have excelled across key segments, and are voted by industry peers.close

Best Cryptocurrency Exchange – Finance Magnates Awardsmore

LMAX Digital has been awarded Best Cryptocurrency Exchange for 2023 by Finance Magnates at its London Summit Awards ceremony. The awards spotlight and garner attention for leading participants that have excelled across key segments, and are voted by industry peers.close

Best Crypto Trading Platform – Financial News Awardsmore

For the second year running, LMAX Digital has been awarded “Best Crypto Trading Platform” by leading industry publication, Financial News in its Excellence in Trading & Tech Awards. The awards are voted on by a panel of independent judges and senior editorial staff, and celebrate the companies and individuals that stand out for the strength of their businesses in Continental Europe and the UK.close

Best Exchange – Hedgeweek European Digital Assets Awardsmore

LMAX Digital has been awarded Best Exchange at the Hedgeweek European Digital Assets Awards. The awards provide a unique insight into the most highly-regarded and successful fund managers and service providers in the digital assets space. The awards are voted on by participants in the financial services industry.close

2022 - 2021

40 Top Innovators in Financial Markets – TabbFORUMmore

LMAX Group CEO, David Mercer has been named in the TabbFORUM 40 Top Innovators in Financial Markets, recognised as one of the technology-driven innovators, disruptors and difference-makers having the greatest impact in the sector. close

Best Exchange (Innovation) – Hedgeweek European Digital Assets Awardsmore

LMAX Digital has been awarded the Hedgeweek European Digital Assets Awards “Best Exchange (Innovation)”. The awards are granted to the top firms in their categories and announced at their annual awards ceremony.close

Best Crypto Trading Platform – Financial News Awardsmore

LMAX Digital has been awarded the 2022 Financial News Awards “Best Crypto Trading Platform”. The awards are presented to the best-performing providers in their category.close

Best Execution Venue – Finance Magnates Awardsmore

LMAX Group has been awarded the Finance Magnates Award “Best Execution Venue” for 2022. The awards are presented to the best-performing firms in their categories and announced at the annual summit in London.close

Best Execution Venue – Global Forex Awards B2B more

LMAX Group has been awarded the 2022 Global Forex Awards B2B “Best Execution Venue”. The awards are presented to the best-performing providers in their category as voted on by business customers, traders and investors globally.close

Best Execution Venue – Finance Magnates Awardsmore

LMAX Global has been awarded the Finance Magnates Award “Best Execution Venue” for 2021. The awards are granted to the top firms in their categories and announced at the annual London summit.close

2020 - 2019

Best Cryptocurrency Exchange – Finance Magnates Awardsmore

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

Best Institutional Digital Asset Platform – Profit & Loss Readers' Choice Awardsmore

LMAX Digital has been awarded The Profit & Loss Readers' Choice Awards “Institutional Digital Asset Platform”. These awards are voted on by the readers and recognise excellence within the foreign exchange industry throughout the previous year. close

Crossover Award for Best Crypto/Fiat Initiative – Profit & Loss Readers' Choice Awardsmore

LMAX Group has been awarded The Profit & Loss Readers' Choice Awards “Crossover Award for Best Crypto/Fiat Initiative”. These awards are voted on by the readers and recognise excellence within the foreign exchange industry throughout the previous year. close

Best Anonymous Matching Platform – Profit & Loss Reader' Choice Awardsmore

LMAX Group has been awarded The Profit & Loss Readers' Choice Awards “Best Anonymous Matching Platform”. These awards are voted on by the readers and recognise excellence within the foreign exchange industry throughout the previous year.close

Best Execution Venue – Finance Magnates Awardsmore

LMAX Group 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

2018 - 2017

Best Crypto Solution Provider – Finance Magnates Awardsmore

LMAX Exchange has been awarded the Finance Magnates Awards “Best Institutional Crypto Solution Provider”. The awards are granted to the top firms in their categories and announced at the annual London summit.close

Best Margin Sector Platform – Profit & Loss Readers' Choice Awardsmore

LMAX Group 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

2016 - 2015

Best Trading & Execution Technology – HFM US Technology Awardsmore

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

Best FX Trading Venue (ECN/MTF) – WSL Awardsmore

LMAX Group 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

Deloitte UK Technology Fast 50 – Deloitte 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

Deloitte EMEA Technology Fast 500 – Deloittemore

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

Fastest Growing Tech Company in the UK – The Sunday Times Tech Track 100more

LMAX Group 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

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

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

2014 - 2013

Best Infrastructure/Technology Initiative – WSL Institutional Trading Awardsmore

LMAX Group 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

Best Overall Testing Project – The European Software Testing Awardsmore

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

2012 - 2011

Best Trading System – Financial Sector Technology Awardsmore

The FST Awards recognise excellence and innovation in the field of information technology within the UK and EMEA financial services sector.close

Innovative Programming Framework – Oracle Duke's Choice Awardsmore

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

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).