GAIN Capital (NYSE:GCAP) has just announced that it is implementing new rules for liquidity providers (LPs) to its institutional electronic communications network (ECN) GTX. According to the company, the move is designed to improve the execution quality of the broker’s services to its end clients.
The new rules of engagement are directed at market makers who deliver Reviewable Liquidity, defined as orders and quotes submitted to the GTX venue which must be accepted or declined prior to execution.
The New GTX Rules for LPs
A number of points have been covered starting with a 250 millisecond response time, which is half of the acceptable rate within which market makers have been required to accept or decline incoming orders until now – 500 milliseconds.
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A new rule aims to define for market makers a Targeted Acceptance Rate of 80 to 85 percent of the orders sent to them. The minimum quote size has been set at $1 million, with GAIN Capital stating that this rule’s aim is to assure a level playing field.
Lastly, every market maker has to maintain a minimum average daily volume (ADV) of $200 million or more, which is aggregated across all price feeds (including firm liquidity).
Commenting on the announcement, the Head of Liquidity at GTX, Steve Reilly explained, “Refining the rules of engagement of our liquidity provision will deliver a superior trading experience to our customers. These measures will improve the response time and fill ratios for our clients while reducing trade rejections.”
The trading volumes of the company’s institutional ECN offering, GTX have increased by 36 percent in the first half of this year.
The company’s Global Head of Sales, John Miesner, said, “The market has recognized our unique value proposition, which has resulted in strong volume growth for GTX. This unique value proposition includes a commitment to delivering the highest standards of liquidity provision and execution, transparency around the rules of engagement and access to an increasing diverse range of participants through our prime of prime services.”