Edgewater Targets LatAm Growth with Matching Engine Launch

Edgewater Markets is expanding its LatAm business with the
launch of a local matching engine in Mexico City.

The
deployment of the server in the KIO-5 data centre in Mexico, which recently went
live in Q3 2016, enables customers to cross connect directly to Edgewater’s
local environment. It will support a range of currency pairs, with a strong
focus on MXN crosses.

“We are
constantly looking for ways to grow our business and to penetrate into new
areas of the market and we identified order management as a gap in our
offering. We have clients aggressing rates on our platform very actively, but
we were lacking on order capability. We wanted to close-up the gap in our
offering and also provide a local system for market participants that is faster
than what is already available,”
explains
Robert Sanchez, managing director
and head of Edgewater’s LatAm business.

He adds
that from a technology perspective, the launch was complementary to Edgewater’s
existing infrastructure. Given that the firm built its matching engine
in-house, already uses it in New York and recently launched it in London, it
was just a matter of putting the servers in place in Mexico City.

Because
it co-exists with Edgewater’s existing platform, this is essentially a piece of
bolt on functionality, meaning that it requires no additional technology
deployments from its clients to access the matching engine.
 

One
advantage of having a matching engine locally, according to Sanchez, is that it
reduces trading latency. While there isn’t necessarily the same demand for
high-performance, low-latency trading that exists in more mature FX markets
such as London and New York, having a matching engine with lower latency will
improve execution quality for firms trading in Mexico.

0pfjyjpYlQbPSqYc1NfA8Q4t9CzkeH2zGPoecSBw.pngLocal support

The
other interesting element of this launch is the impact that it could have on
the local FX market in Mexico. Although USD/MXN is one of the top 10 most
actively traded currency pairs globally, at Profit
& Loss’s
Latin America conference in Mexico City earlier this year,
Alfredo Sordo, director of domestic operations at Banco de Mexico, highlighted
that in the region of 60% of trading in this pair is done outside of Mexico.

With
many of the larger international banks pulling back from market making
activities in FX, this offers an opportunity for Mexican banks to bring some of
this trading activity back to their local market, says Sanchez. He adds that better
access to technology is making it easier and more cost effective for banks in
Mexico to make markets in MXN crosses and therefore the regional banks will
become larger players in this market as they continue to invest in this space.
 

In a press
release issued today, a number of senior figures in the Mexican FX market
praised the impact that Edgewater’s efforts could have on local FX trading. “Being
the first FX platform based in Mexico, the local FX trading community will have
access to a closer and more reliable pool of liquidity,” says Felix Vargas,
chief dealer at Banca Mifel, a Mexican brokerage firm.

Meanwhile,
Felipe Alanis, head of e-FX at Banorte, says that the local matching engine
will improve “the overall trading conditions particularly by reducing latency
resulting in a superiour customer experience”, and Juan Carlos López Piña,
director of FX product development at Intercam Banco, adds: “The Edgewater
Markets solution facilitates the implementation in Mexico of FX technology that
requires quick response times and independent liquidity”.
 

Sanchez
says that the launch of this matching engine in Mexico is part of a broader
growth strategy for the firm in LatAm, which could see it launch matching engines
in other parts of the region and other emerging market areas globally.
 

This
expansion of Edgewater’s presence in Mexico follows the
$30 million equity investment from FTV Capital that it
announced in March and
a subsequent raft of senior
hires
at the
firm.

  

galen@profit-loss.com 

@Galen_Stops 

@Profit_and_Loss

Galen Stops

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