FX Week, July 2013 - The use of randomisation logic to eliminate the execution advantages gained on foreign exchange trading platforms by some high-frequency traders (HFTs) was denounced as little more than a “marketing ploy” by a group of platforms and technology vendors at FX Week USA.
Speaking during a panel discussion, David Mercer and Dmitri Galinov, chief executives of LMAX Exchange and FastMatch respectively, agreed the use of randomisation, which is a central tenet of bank-backed platform ParFX and is also being rolled out on EBS, is unlikely to become widespread.
“I think randomisation is nuts, and it covers deficiencies in existing venues. Technology hasn’t gone anywhere near as far as it is going to. We talk to some of the banks that allegedly would prefer or are involved in randomisation, and they say they want to be done in price-time priority, but sure, if they are losing out to HFTs, then let’s randomise. The banks have caught up a lot with the HFTs. Randomisation is easy to do; it’s trivial technology-wise, but it is a marketing ploy right now, apparently to create fairness. I don’t think it will be the way forward,” said Mercer.
“Typically every market goes through this, where you have primary venues that don’t have good technology,” added Galinov. “They come out with randomisation mechanisms and other things, but ultimately new venues with better technology will show up; they will buy them and they will upgrade their technology, which will benefit all participants.”
Other panellists agreed randomisation is unlikely to spread, and that while ParFX and EBS have argued it creates a fairer playing field, it could tip the balance too far by delaying orders and preventing participants from getting the best out of their technology. Better market surveillance might be a more effective way to tackle latency arbitrage, said Yaacov Heidingsfeld, chief executive of liquidity aggregation technology vendor TraderTools.
“If we can self-police away from latency arbitrage, and get rid of the valueless volume and flow that goes through platforms just because market participants are taking advantage of latency, I think that will go a long way toward creating the fairness everybody is talking about. But people that are faster inherently and can spot market trends more quickly – and certainly that would include some types of HFT – should be allowed to profit and benefit from things like that. It is not knowing which way the market is going first that is the problem; it is taking advantage of those market participants that can’t act fast enough because of infrastructure or technology limitations,” said Heidingsfeld.
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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
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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
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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.