CFH, the UK FCA-authorized prime brokerage solutions provider, has created a dedicated Zero hold time liquidity pool, which came in response to market structure changes and is in accordance with the principles of Global FX Code.
The Copenhagen-based firm says the new service caters to clients whose priority is the speed of execution and those who want multiple liquidity pools for different trading strategies. Under the new model, the rationale was to meet all these requirements through a single account where everything is cross margined and netted down automatically, providing a capital and cost efficient solution.
Zero hold time is already being applied by CFH’s liquidity partner XTX Markets which has been applying the model to its FX counterparty businesses for many years and was, in fact, the first to do so. The model removed the holding time between when a client makes a trade request and when the liquidity either accepts or rejects the request. This allows liquidity providers to see the latest market data updates before applying price checks which reduces the odds of being hit on a stale price.
CFH and XTX Markets believe that the market will move to the new model in the future as the rationale for imposing a holding window weakens across the FX primary markets with data updated much more frequently than ever before.
The Zero hold time was created as major FX liquidity venues were changing the way they handle last look – a controversial practice in currency markets that allows dealers to back out of losing transactions.
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“Historically there has been a trade-off between speed of execution and pricing. Traders should have the option to choose which is right for them based on their trading style and requirements,” said Andy Biggs, Head of Liquidity at CFH.
Wider Adoption Would Lead to a Fairer Market
CFH’s liquidity and prime brokerage services are spanning its whole product range including 7 asset classes and over 800 instruments, all of which can be traded through one margin account.
Enabling clients’ access to such a broad list of B2B derivative products under a unified technology and clearing solution is a highly progressive model for the region, both in terms of software and brokerage.
“Extending Zero hold time liquidity is a fantastic initiative. This product shows there is no reason for hedge funds and established brokers to accept excessive last look windows or quotes they cannot hit, in today’s market,” said Matt Clarke, head of distribution and liquidity management for EMEA at XTX Markets.
XTX Markets has steadily climbed the ranks of electronic market makers, displacing leading banks such as J.P. Morgan Chase in the process. The computerized trading firm, which handles more than $150 billion in trades every day, mainly employs mathematical models trained on huge data sets to connect buyers and sellers.