traditional venues introducing enhancements. It’s a very competitive environment with increasingly sophisticated and knowledgeable customers and no single venue can afford to be secure or complacent with its current offering. From this prospective, offering the traditional ECN principles of speed, transparency, price discovery is merely one of several foundations required for efficient FX and multi asset trading. Tis type of development and interaction is now so pervasive that FX is becoming a widespread component of price discovery in other asset classes and vice versa.
Virtually every electronic product or market is becoming available to both retail and institutional traders in one form or another. Although there are legitimate concerns about Best Execution and leverage standards at the uninformed retail level, for the more informed, true multi asset global price discovery is becoming a reality. Perhaps ironically though, all the rapid development has created even greater variation in the standards of liquidity, market data, execution, and rules of engagement.
Fluctuating standards and lack of clarity around the trading process itself create their own challenges. Tese may well outweigh the benefits of greater choice especially if the customer and the platform are operating under different assumptions. At SFSL we very carefully assess these to ensure we communicate properly through the entire sales cycle.
Platform development
Most of the platforms in production today either maintain the model which was dominant at the time of their launch or altered their rules of engagement as the market changed. At SFSL we followed the progression from single bank, to multibank, to multi bank and non bank trading, but we did not abandon earlier incarnations, so that now we offer a broad range of liquidity pools, order types and trading methods all enhanced with the latest technology. Maintaining system integrity was slow and laborious but it allowed very high customer retention and critically it kept us up to date on precisely which profiles gained the greatest value from which setup. Not incidentally, this flexibility is the most important factor in our recent White Label success.
We are not restricted to re-branding our technology Wholesale. Instead we are able to reconfigure the entire platform, including trading interfaces, strategic partnerships, and trading principles so that they match the customer’s objectives and trading environment. In this way we can rapidly role out a range of end to end,
user friendly solutions from the simple and functional retail Metaquotes solutions, to complex corporate and regional banking structures.
In our system it is not unusual for a professional trader to execute his systematic EUR/USD limit and OCO orders in our fully aggregated market and have his stops routed to a designated LP for low slippage execution. It is also not unusual for a mid- tier bank in our system to trade market orders for 5 million EUR/CHF against our non aggregated quotes while working smaller orders inside our aggregated bid offer spread and trading the same price on both. Efficient trading today is largely about understanding the interests of all parties to the trade and applying the appropriate rules of engagement.
Merging innovation with technology
As products become more complex this merging of innovation and technology becomes ever more important. Take the case of a liquid and competitive aggregated Spot to Futures Swap market. It provides endless opportunity for participants of both markets, but it also facilitates competitive quotation of OTC equivalents to those exchange traded products and of course it also functions as an alternative Forward market.
When it came to launching emerging markets on our platform we quickly realized that understanding the nature of order flow, liquidity, the trading process and clearing efficiencies were essential just to get regular business done. Here again the rules of engagement varied wildly from RFQ to competitive order driven aggregations depending on currency, order size, and type, credit, and the nature of the flow itself.
We believe it is clear that electronic markets are not converging on one set of principles or trading architecture. Instead they are continuously fragmenting and regenerating disparate products and areas of value. Te service providers who will capture market share in this environment are those who take the time to understand their customer’s objectives and piece together the solutions in an efficient and user friendly way. Tat side of the business hasn’t changed but it has gotten a lot more complicated.
Squared Financial is regulated by the Central bank of Ireland april 2011 e-FOREX | 145
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