Are Liquidity Providers Doomed to Fail and Consolidate?

Ahead of London Summit 2016, Tom Higgins weighs in on retracting Prime brokers and the ensuing liquidity vacuum.

The 2016 Finance Magnates London Summit is quickly approaching, with the industry’s biggest names gather on the stage. As an appetizer, we discuss with speakers and provide a glimpse into their agendas and priorities. Featured in today’s installment is Tom Higgins, the Chief Executive Officer (CEO) of Gold-i, who joins others in highlighting the new liquidity landscape.

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What is your position and what does your role entail?

I am the CEO, Chairman and Founder of Gold-i. As the business has grown my role has become less and less operational and is now almost 100% leadership and strategic.

My strong Management Team runs the business on a day to day basis, allowing me the time to focus on driving the business forward and meeting clients and prospects to discuss technology ideas which will help to accelerate broker growth.

I also make sure that Gold-i employees are living our values of delivering excellence to clients and always going the extra mile. I place a lot of emphasis on ensuring that Gold-i is a great organization to work for and that employees enjoy working for the company.

We plan three years ahead and I manage that process using outside facilitators so that everyone involved can participate fully. I see myself as the thought leader, role model, and ambassador for fun!

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What was the single most important event or development that the market has seen in 2016?

A few months ago I would have said Brexit, but that has not actually changed the landscape much at all. I think the biggest shift has been the retraction of the Prime Brokers making it very difficult for Prime of Primes to operate.

This created a liquidity vacuum, which has been nicely filled by the rapidly growing non-bank liquidity providers. All of these new non-bank liquidity providers require fast and modern technology, so we have been busy!

the biggest shift has been the retraction of the Prime Brokers

What are the biggest challenges that the FX trading community is facing?

Liquidity providers are being squeezed all the time and the gap between the leverage they get up-stream from their banks and the leverage they offer down-stream to their brokers is widening.

In addition to this, brokers are demanding tighter spreads, which reduces the potential LP profit and increases their risk. I predict there will be some liquidity provider failures as well as more consolidation.

What is the main message you’d like to convey to London Summit delegates?

My message is that brokers need to really understand where their business is today and where it is going. Taking each day at a time and not planning for change will result in a gradual demise. Every change, event or disaster is actually an opportunity waiting to be exploited.

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