Credit Suisse and FXCM are to launch a new electronic communication network (ECN) for foreign exchange trading called FastMatch, joining a growing number of FX trading platforms launching this summer.
The companies say FastMatch will offer customers access to large pools of diversified liquidity at unparalleled speed. The liquidity will initially come from FXCM’s institutional and retail client base.
“FXCM is the largest retail aggregator in the world and they also have a very significant institutional business,” says Dmitri Galinov, CEO of FastMatch and former head of Crossfinder at Credit Suisse. “This is the liquidity that is going to seed the platform and then we will on-board other retail aggregators, institutional clients and banks. What is unique about the platform is that it will divide liquidity into different pools to satisfy the needs of the different client bases.
“FastMatch will revolutionise forex trading by introducing the speed and transparency of equities trading to a diverse set of clients including retail brokers, institutions, banks, hedge funds and proprietary trading firms.”
The FastMatch ECN is based on technology that underpins Credit Suisse’s equities crossing system – the Crossfinder matching engine. This has been tailored and adapted to the needs of the global foreign exchange markets, the companies say. FastMatch’s matching engine is located in the Equinix NY4 facility in Secaucus, NJ, a central location for FX clients. The company plans to launch a second matching engine in the LD4 facility in Slough in the UK.
FastMatch will disseminate quotes and trades with sizes and prices in real-time, Galinov says. “Some platforms delay quotes by up to 200 milliseconds. FastMatch is not going to have any delays; as soon as the order is in the platform the quote will automatically be displayed. In addition to the best bid and offer, FastMatch will offer clients the ability to see in real-time all the trades on the platform, so the prices transacting on the platform and the sizes.”
He adds that the platform’s round trip response time is 165 microseconds, up to 10 times faster than some of its competitors.
The system will be rolled out in phases starting on 1 July, with the final release scheduled for September 2012. Each phase will offer new functionality and more clients on the system. In the first phase, the platform will offer basic limit order functionality. In subsequent phases it will offer support for more advanced order types, allowing institutional clients to transact large sizes with minimum market impact by using orders such as hidden pegged to midpoint, reserve and minimum quantity.
When completely rolled out, FastMatch will allow clients to trade in one of four liquidity sub-pools each governed by its own rules of trading. The first pool will be for retail aggregators, the second for GUI aggregators, the third will be general, meaning anyone can participate, and fourth pool will be for banks only, Galinov says.
“There will be different rules, so for example in the bank-only pool we will have a minimum quote life of 200 milliseconds; in other pools we will not. Each pool is created for a different client base and each client base trades a little differently, so we are customising the rules of engagement to address the specific needs of that client base,” he adds.
FXCM struck the deal with Credit Suisse in April with the bank contributing technology and cash to start up the platform. FXCM is contributing its order flow, offices and other support. Each partner firm holds a 40% stake with the remainder held by management and employees of FastMatch. The partners are looking to add to the ownership group by selling equity stakes to other firms, Galinov says.
“FXCM believes that FastMatch brings the functionality needed from a matching system in today’s trading environment, which was currently missing in the forex space,” says Drew Niv, CEO of FXCM. “We stand behind this platform because it has taken technology from the equities markets, which works, and adapted it for the forex market so that our forex clients can benefit.”