Exclusive: LMAX Entering Interbank Spot FX Trading Market
Moving into the crowded inter-bank spot FX trading space, London-based multilateral trading facility (MTF), LMAX, has launched LMAX Interbank. LMAX Interbank is leveraging the firms’ existing matching technology that is currently used in its LMAX Exchange product.
As opposed to an ECN which aggregates Liquidity Liquidity The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent Read this Term quotes from multiple sources on one trading venue, exchange matching platforms are order based. As a result, orders provided by both market makers and traders are entered into one central matching book. Once included, orders are firm and can’t be rejected. For traders, this provides three main benefits; Liquidity Aggregation Liquidity Aggregation Aggregation or liquidity aggregation can be characterized as the process of gathering buy and sell orders from different sources and directing them to a given executing party. This is most commonly done from multiple sources to minimize the risks from using a single liquidity provider. By aggregating liquidity from multiple sources, the broker is able to increase the depth of market it offers to its clients and therefore deliver better fills on the order flow when compared to when it uses a sing Aggregation or liquidity aggregation can be characterized as the process of gathering buy and sell orders from different sources and directing them to a given executing party. This is most commonly done from multiple sources to minimize the risks from using a single liquidity provider. By aggregating liquidity from multiple sources, the broker is able to increase the depth of market it offers to its clients and therefore deliver better fills on the order flow when compared to when it uses a sing Read this Term, higher execution rates, and the ability to cross orders with other traders.
With an exchange based system, multiple bids/offers provided at one price point are aggregated into one order; thereby providing a seamless method to execute a transaction from multiple parties simultaneously. Additionally, as opposed to ‘quote’ based venues which provide liquidity providers with ‘last look’ abilities, orders on exchanges are firm which removes rejections rates. However, with these benefits may come wider spreads. As liquidity providers typically price to their worst client, participants typically offer wider spreads to defend themselves from toxic order flow; traders seeking to take advantage of arbitrage opportunities.
LMAX Interbank MarketFactory Web GUI
Targeting institutional traders, trading conditions at LMAX Interbank are similar to those at leading FX ECNs. This includes minimum size orders of 1,000,000 units, FIX Protocol connections, and multiple bank participants. Acting as the central counterparty to trades is Rabobank. In addition, LMAX Interbank is providing a Pre-Trade risk solution. The product allows participants to set limits on their maximum settlement exposure. Orders sent that break the limits are automatically rejected by the system. According to LMAX, the Interbank exchange will provide users with average execution times of 1.5ms, with no fixed costs.
Connecting to the exchange, LMAX Interbank is providing both an API and Web based solution. The Web based interface is being supplied by MarketFactory, known for its liquidity aggregation systems. Additional partners include Thomson Reuters Dealing Aggregator, First Derivatives, smartTrade, and Broadway Technology. The venue also connects with post-trade solutions providers Traiana, MarkitServ, DealHub, and the firms’ proprietary LMAX DropCopy.
We reached out to LMAX for further comments, but the firm is currently in their ‘quiet period’ in anticipation of their official public launch of the exchange. Overall, the launch of LMAX Interbank marks an extension of their business model which had until now been focused on providing liquidity to the retail market. However, in an interview with CEO David Mercer following the firm’s management buyout in December 2012, he mentioned “that they are working to increase their work with broker dealers either as the sole STP liquidity source or part of an aggregated feed”.
Moving into the crowded inter-bank spot FX trading space, London-based multilateral trading facility (MTF), LMAX, has launched LMAX Interbank. LMAX Interbank is leveraging the firms’ existing matching technology that is currently used in its LMAX Exchange product.
As opposed to an ECN which aggregates Liquidity Liquidity The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent Read this Term quotes from multiple sources on one trading venue, exchange matching platforms are order based. As a result, orders provided by both market makers and traders are entered into one central matching book. Once included, orders are firm and can’t be rejected. For traders, this provides three main benefits; Liquidity Aggregation Liquidity Aggregation Aggregation or liquidity aggregation can be characterized as the process of gathering buy and sell orders from different sources and directing them to a given executing party. This is most commonly done from multiple sources to minimize the risks from using a single liquidity provider. By aggregating liquidity from multiple sources, the broker is able to increase the depth of market it offers to its clients and therefore deliver better fills on the order flow when compared to when it uses a sing Aggregation or liquidity aggregation can be characterized as the process of gathering buy and sell orders from different sources and directing them to a given executing party. This is most commonly done from multiple sources to minimize the risks from using a single liquidity provider. By aggregating liquidity from multiple sources, the broker is able to increase the depth of market it offers to its clients and therefore deliver better fills on the order flow when compared to when it uses a sing Read this Term, higher execution rates, and the ability to cross orders with other traders.
With an exchange based system, multiple bids/offers provided at one price point are aggregated into one order; thereby providing a seamless method to execute a transaction from multiple parties simultaneously. Additionally, as opposed to ‘quote’ based venues which provide liquidity providers with ‘last look’ abilities, orders on exchanges are firm which removes rejections rates. However, with these benefits may come wider spreads. As liquidity providers typically price to their worst client, participants typically offer wider spreads to defend themselves from toxic order flow; traders seeking to take advantage of arbitrage opportunities.
LMAX Interbank MarketFactory Web GUI
Targeting institutional traders, trading conditions at LMAX Interbank are similar to those at leading FX ECNs. This includes minimum size orders of 1,000,000 units, FIX Protocol connections, and multiple bank participants. Acting as the central counterparty to trades is Rabobank. In addition, LMAX Interbank is providing a Pre-Trade risk solution. The product allows participants to set limits on their maximum settlement exposure. Orders sent that break the limits are automatically rejected by the system. According to LMAX, the Interbank exchange will provide users with average execution times of 1.5ms, with no fixed costs.
Connecting to the exchange, LMAX Interbank is providing both an API and Web based solution. The Web based interface is being supplied by MarketFactory, known for its liquidity aggregation systems. Additional partners include Thomson Reuters Dealing Aggregator, First Derivatives, smartTrade, and Broadway Technology. The venue also connects with post-trade solutions providers Traiana, MarkitServ, DealHub, and the firms’ proprietary LMAX DropCopy.
We reached out to LMAX for further comments, but the firm is currently in their ‘quiet period’ in anticipation of their official public launch of the exchange. Overall, the launch of LMAX Interbank marks an extension of their business model which had until now been focused on providing liquidity to the retail market. However, in an interview with CEO David Mercer following the firm’s management buyout in December 2012, he mentioned “that they are working to increase their work with broker dealers either as the sole STP liquidity source or part of an aggregated feed”.