24 Exchange, the OTC platform backed by Fastmatch founder Dmitri Galinov, is going live today with its first product, the FX non-deliverable forwards (NDFs). The multi-asset venue claims to offer institutional market participants a more cost-effective way to trade FX NDFs through eliminating market data fees.
While the Bermuda-based electronic platform initially trades NDFs, other FX derivatives, including swaps and underlying currencies, could follow, as well as possible expansion into equities and fixed income.
NDFs comprise a small portion of overall FX turnover. Still, the product has experienced impressive growth in recent years as it provides a way to trade spot FX in restricted markets where currencies are not deliverable. NDFs are distinct from other currency products because they do not have a central exchange or delivery. Instead, the trades are cash-settled based on the difference between the exchange rate at the time of the trade and the exchange rate at maturity.
Ultimately, 24 Exchange plans to provide, following the roll-out, end-to-end processing, and workflow services across over the counter derivatives asset classes.
24 Exchange has partnered with Standard Chartered Bank to offer a central prime broker clearing model that aims to lower margin costs for participants. Traditionally, FX prime brokers created a capital inflow through charging initial margins from their clients whilst they don’t post such margins to their execution brokers.
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The platform has completed the onboarding of several liquidity providers streaming NDFs across all supported pairs, regardless of the underlying tenor, including those with non-standard maturities. As such, the platform “facilitates broken dates NDF trading via request-for-stream (RFS) functionality,” it said.
In terms of management structure, Galinov assumes the CEO role at 24 Exchange. In addition, he recruited Bridgewater Associates’ former executive Jason Woerz as the president and also added Paul Millward, head of FX product strategy at Cboe Global Markets.
Dmitri Galinov is one of Wall Street’s electronic trading pioneers. Earlier this year, the 44-year-old man reached a settlement agreement with FastMatch and its parent Euronext to their longtime spat. Galinov filed his lawsuit against Euronext in New York last year for the unlawful termination of his employment, just over one year after Euronext acquired a 90 percent stake in a $153 million deal.
Commenting on the news, Dmitri Galinov said: “24 Exchange is a robust alternative to the major exchanges that delivers an over-the-counter solution at significantly reduced prices with improved functionality. Unlike the major legacy exchanges, our new platform will offer 24-hour trading capabilities for an unmatched range of asset classes.”
Jason Woerz, President of 24 Exchange, added: “Our NDF launch is the start of a longer and much needed progression of the existing market structure that our platform will make possible. The rising costs of regulations and fees associated with the legacy exchanges can be the largest cost factor in many participants’ budgets – and with little to no utility in return.”