Executive Interview: Emmanuel Carjat, Managing Director, TMX Atrium

TMX Atrium, a low latency venue-neutral infrastructure provider, first entered the French market with a point to point connectivity solution

TMX Atrium, a low latency venue-neutral infrastructure provider, first entered the French market with a point to point connectivity solution in 2006, subsequently taking advantage of MiFID in order to expand its footprint across Europe. Two years later, the company entered the US market which then led to the establishment of a North American headquarters in Markham, Ontario, Canada.

In this week’s Executive Interview, Forex Magnates speaks to Emmanuel Carjat, Managing Director of TMX Atrium, in order to discuss the development of TMX Atrium under his 7 year tenure at the head of the company and its corporate direction for the immediate future.

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Please let us know about yourself, your industry background and how you arrived at TMX Atrium.

TMX Atrium Managing Director Emmanuel Carjat
(Front Row, 2nd From Left)
With the TMX Atrium Management Team
Toronto Stock Exchange, August 2011

From 2001 to 2006, I was with Radianz (now BT Radianz) where I was responsible for designing and developing secure and reliable solutions for the Western European financial community. During my tenure, I spotted a gap in the market, namely using the internet to address client connectivity requirements.

In 2006, I helped co-found what is now called TMX Atrium, a provider of smarter infrastructure solutions for the global financial services community. Subsequent to the 2011 acquisition, TMX Atrium is now part of the TMX group of companies.

TMX Atrium has grown year-on-year across Europe taking the firm into additional services, new asset classes and new geographies. In 2008, TMX Atrium entered the US market and in 2010 the Canadian market.

In 2012, we saw the emerging market opportunity in Moscow and duly built an ultra-low latency route from Moscow to London to enable TMX Atrium participants to take advantage of the available trading opportunities. The demand for access to the Russian markets is continuing to grow in 2013.

Where are you seeing the biggest demand for point to point connectivity?

Demand for connectivity is currently most prevalent between Moscow and London, enabling participants to take advantage of the trading opportunities available between the International Order Book (IOB) and the Moscow Exchange equity market.

Similarly, the TMX Atrium community demand is continuing between the US and Canadian markets to enable trading of US / Canadian interlisted stocks. In both cases, demand is being driven by equity/FX arbitrage opportunities between Moscow and London and between the major FX hubs especially LD4 (London 4) and NY4 (New York).

What is your view in terms of different regions, and whether there is demand from traders looking to trade more markets or banks/exchanges moving to deliver their pricing and products to more countries?

The demand for access to the less saturated markets of Russia is being driven by High Frequency Traders (HFTs) looking to take advantage of a less mature market on the basis that there is less competition offering additional trading opportunities.

Furthermore, the Moscow Exchange is successfully courting HFTs; with new infrastructure build outs such as Moscow Exchange’s SPECTRA engine, the planned concentration of liquidity in one location at the M1 (Moscow 1) data center and the planned increase in settlement period.

For foreign firms entering emerging markets, what are the difficulties they encounter and advantages they have versus local firms?

The barriers for entry into Moscow remain high; cultural, language, infrastructure, commercial and legal to name a few.

However, local Russian brokers are continuing to look for international market participants to enter the Moscow marketplace, hence the partnerships we put in place with the Exchange and Russian brokers, which allow TMX Atrium participants to benefit from additional local expertise.

You are currently providing connectivity in Brazil and Russia, but not in the other hot markets like South East Asia and China, are those regions of less interest or are you just seeing more demand from clients for Sao Paulo and Moscow?

TMX Atrium is driven by the demands of our customer base. Today, we have clients pushing into emerging/emerged markets such as Russia. We are now extending this with enhanced routes and lower latencies.

At the same time, we are undoubtedly aware of Asia. However I would say that the demand within Asia is still localized, for the simple reason that low latency is not as prevalent pan-Asian as it is in North America or pan-European. We are of course continuing to monitor the region and have a well-established history of expanding to address opportunities and client requirements.

Toronto is a stock trading city, and there is very little electronic trading there. Markham Ontario is therefore an unusual choice of base. What prompted this, and are you involved in any Canadian business? If so, please elaborate on that.

Toronto is a significant hub for electronic trading of stock (equity) with eleven trading venues both lit and dark across three main liquidity centers in Toronto with the majority of those venues coming into existence at or around the time that the Order Protection Rule came into force in 2010.

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This created a fragmented environment; an environment that still very much exists today.

Location for electronic trading is driven by a number of factors, including proximity to markets as well as power, scalability and access to other key liquidity centers.

In the Canadian marketplace there has been a draw to Markham where four (shortly to be five) of the venues are located as well as MX, offering trading of all the derivatives of Canadian listed stocks.

While the FX market is very limited with Toronto, there are FX opportunities for clients trading between instruments listed in the both the US and Canada, as this offers both a pricing advantage as well as an FX arbitrage opportunity. We provide access into/out of Markham as well as 34 other liquidity centers across 11 countries including major FX hubs such as NY4 and LD4.

Please provide technical detail on your collaboration with FIX Protocol (FPL).

Our network supports FIX as well as proprietary exchange protocols (e.g. ITCH, UTP, etc.), which allows our customer base to interact and communicate with every participant across the trading lifecycle. Our network is designed for the transport of market data and orders and is therefore much aligned to FIX Protocol. Similar to FPL, the operator of the FIX Global Foreign Exchange group, we operate for the benefit of the financial community.

What will the institutional firms do in terms of keeping their offerings low-latency, bearing in mind the extremely fast execution rates expected nowadays from end users with raw-spread, and increasing load on the systems in areas such as North America and UK?

Institutional firms will continue to focus on offering a service-based approach, some elements of this service may be low latency, some may be liquidity and some may be clearing. However if a firm’s only strategy is low latency then it cannot be called a strategy.

We believe there needs to be continued investment in infrastructure, not just to enable low latency trading, but also to handle the increased load on networks which will continue incrementally as the number of FX venues continues to increase.

Furthermore as FX feed size increases proportionally as more and more machines are used in daily trading, systems must have the capability to scale now and in the future, as well as cope with the day-to-day-demands caused by sudden spikes.

Does direct connection have a future? It is quite easy nowadays to lease cloud based solutions from liquidity providers. Which type of company uses this method?

Direct connectivity is important and will remain so but it depends on what a firm is trying to achieve.

In the case of retail flow, if a third-party is aggregating FX liquidity and bringing that flow to you, then cloud may be appropriate.

If you are aggregating flow yourself and require low latency or higher quality access to enable better price improvement, then direct connection is critical.

A proprietary firm, for instance, will focus on direct connectivity if trading into and out of multiple centers across multiple currency pairs in micro seconds; whereas the retail side is not as latency sensitive, as traders are usually screen-based and looking to trade in the millisecond/seconds latency range.

Whatever client-type, participants want access to up-to-date pricing and require the ability to execute against that opportunity; nobody likes stale data or missed trading opportunities. Individual business models and client expectations should drive infrastructure requirements and dictate the platforms required to support that.

With exchanges like LMAX and hosted liquidity from Boston Technologies and Leverate, all with guaranteed low latency, what is the advantage of using TMX-Atrium’s system?

TMX Atrium is complementary to participant trading firms as our strength lies is bringing clients together with venues such as LMAX. Clients can use TMX Atrium as a component in their solution, such as extending their reach across Europe for example.

TMX Atrium is venue neutral and we find that our clients are increasingly focused on reliability, availability, increasingly low latency and an ability to improve the link from multiple centers back to venues.

What is the company’s plan for this year and the immediate future?

Throughout 2013 we will continue to build on our existing success into and out of Moscow and further expand our FX trading community, as participants look to take advantage of currency pairs such as the USD / RUB options between Moscow and London. Furthermore, we will continue to build on our existing infrastructure and penetrate into new asset classes e.g., hard commodities, as evidenced by the announcement of London Metal Exchange (LME) in March 2013, which enables on-going growth and choice for the TMX Atrium FX community.

Finally as regulation in Europe and North America extends into Interest Rates, we are seeing the creation of new electronic trading opportunities e.g. Interest Rate Swaps which can generate additional demand for FX data if the two underliers are located in different countries; each section being a separate leg of a trading strategy. TMX Atrium is linking to these new venues as well as supporting clients’ reach to traditional trading venues.

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