BATS Global Markets, which is the operator of Hotspot, one of the most popular Electronic Communications Networks (ECNs) for foreign exchange trading, has just issued an announcement about a major upgrade to be made available to its clients.
Hotspot is launching Hotspot Link, a tool which is designed to permit the customers of the ECN to build their own liquidity pools. The list of institutional grade liquidity which a number of providers are delivering to the market may be fully tweaked to design a relationship-based liquidity pool that caters to the specific needs of the client.
According to the announcement made by BATS Global Markets, Hotspot Link will be able to facilitate the current state of liquidity provision. With the growing set of different bank and non-bank liquidity providers with different electronic trading platforms and the legacy of voice broking services, the FX market has become somewhat fragmented.
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Using a single connection through Hotspot Link, institutional market participants will be able to focus on client relationships rather than looking for connectivity solutions.
The Senior Vice President, Foreign Exchange at BATS, Bill Goodbody, Jr., explained in the announcement: “Hotspot Link is very much a continuation of BATS’ long-standing objective of empowering market participants to trade in a way that best suits their trading objectives and businesses, rather than dictating specific market models. We very much understand and want to support the critical role relationships play in FX trading.”
The new solution is effectively a customized private market that relies on the existing Hotspot network, infrastructure, and clearing relationships, however it remains separated from the ECN in order to avoid market impact and result in better order fills.
With the ability to choose amongst a list of bank and non-bank liquidity providers, the customized liquidity pools for institutional investors will gain access to not only a continuously-provided list of quotes, but also quotes which are offered on demand. The latter option will be particularly useful for clients trading high volumes, who are aiming to minimize their market impact.