Tradepoint Systems Rolls Out Synthetic NDF Crosses

NDF Synthetics' functionality has long been the go-to solution for providing additional Liquidity Liquidity The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent Read this Term when compared to consuming liquidity from the few Liquidity Providers Liquidity Providers A liquidity provider (LP) constitutes either individual and/or institution that functions as a market maker in a given asset class. Broadly speaking, liquidity providers will act as the both the buyer and seller of a particular asset, thus making a market. In the equities space, many stock exchanges rely on liquidity providers who make the commitment to provide liquidity in a given equity. These liquidity providers commit to providing liquidity in the hopes that they will be able to make a profi A liquidity provider (LP) constitutes either individual and/or institution that functions as a market maker in a given asset class. Broadly speaking, liquidity providers will act as the both the buyer and seller of a particular asset, thus making a market. In the equities space, many stock exchanges rely on liquidity providers who make the commitment to provide liquidity in a given equity. These liquidity providers commit to providing liquidity in the hopes that they will be able to make a profi Read this Term that actually are streaming the illiquid currency pairs directly, according to technology provider Tradepoint Systems.

The recent addition of support for streaming NDFs, in both standard IMM and broken dates by a number of different liquidity providers, has enabled the firm to support its clients to competitively trade and market make NDFs.

“Given the onset of technology enabling us to provide both features, we have now combined the two to offer the ability to trade and market make synthetically constructed NDF crosses on standard and broken dates,” said Noor Mohammed, Director of Business Development at Tradepoint.

He added that the company has most recently seen an influx of clients requesting the ability to trade currency pairs such as EUR/INR combining the NDF and the spot pair currency, respectively.

Meeting client requirements

The firm is consistently seeing an increase in clients combining what were distinct technology features delivered to satisfy individual client requirements to then provide a more holistic solution to all of their clients.

Tradepoint originally developed an internalization system specifically for desk traders to cross against each other’s passive trades in crowded spot desks. The firm extended this feature to support both the e-commerce stack and other client-related channels to provide a more holistic solution to what were originally two distinct problems.

“The real value in our offering is enabling our clients to leverage of each other’s previously requested functional enhancements and being creative in how we use these individual building blocks to approach the problem,” Mohammed continued.

The synthetic NDF generator can use both, full-amount and sweep-able venues to construct the cross with the ability to control legging risks for taking liquidity. The same synthetic price can leverage the firm’s e-commerce stack, whereas the crosses price can be used to in price generation and market making, according to Mohammed.

He explained that construction examples give the end-user choices on how to execute as efficiently as possible, especially in thin liquidity conditions and choppy markets.

“Where broken dates come into play, we typically see LPs (liquidity providers) providing the points for the USD/’NDF’ pair and then apply the same algorithmic logic to construct the broken date NDF cross. However, due to the structure of the NDF market, the nonstandard tenor would typically be handled by bank LPs and get auto-routed into their house books. And in that case, EUR/USD, of course, would be handled and traded on a primary or potentially secondary market, depending on the underlying market conditions”, Mohammed concluded.