Platform speed bumps a ‘marketing ploy’
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
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).