This column comes with a warning as I am getting increasingly grumpy with attitudes to FX market price action. You clearly can’t please everyone, but how can someone complain – as they did to me this week – that what we have seen in sterling this week was “the wrong kind of volatility”? Luckily I have this column to let off steam so let’s do that – with a take down of the model that has turned FX traders into glorified brokers.
Dinosaur Financial Group (Dinosaur), a broker-dealer and subsidiary of Dinosaur Group Holdings, has launched a new global FX trading service.
Through this service, Dinosaur will provide the option of electronic or voice trading for FX spot, forwards, swaps, NDFs, options and deliverables.
Glenn Grossman, founder and chairman of Dinosaur, based in New York, says: “We are pleased to announce our new FX service. With tier-1 banks increasingly ‘derisking’, we find ourselves at an evolutionary point for Dinosaur, and our clients are looking to us to provide a wider range of services.
Less than two weeks ago I discussed platforms raising brokerage rates and made the observation that “I don’t see why FX market participants shouldn’t pay a small amount more brokerage given the level of investment by several platform providers over the last year or two”. I also observed that if customers do complain about higher brokerage then the providers will at least know that they care little about the level of service they are getting as long as there is a price and the bro is low.
Well, I can report that early feedback is that I was dead wrong on the first and spot on with the second!
The world is all about keeping the customer happy and that is not always the easiest thing to do – they are such irrational things sometimes! Aside from such matters, two news items this week have piqued my interest – not only do they mean that Thomson Reuters can have a long hard look at its FX business, but we will also find out if customers really do care more about market quality than they do the brokerage bill that arrives every month!
NEX Markets has raised brokerage on its Select and Direct platforms following last year’s release of NEX Analytics and what Tim Cartledge, head of FX at NEX Markets, terms, “a range of improvements” to the platform including better aggregation logic and sweeping capabilities.
Notification of the price rise is understood to be going out in Europe this week with the rise to come into effect in April, it will also apply in Asia and the Americas in coming months as the new functionality is embedded in those regions.
Following the launch of the consolidated tape in September, Dmitri Galinov, CEO of FastMatch, is envisaging a new business model whereby the platform will not charge firms at all for brokerage.
Looking ahead in 2018 Galinov explains that the focus for FastMatch is going to be on expanding its market data business, which he predicts could grow large enough that it will be unnecessary to charge market participants a brokerage fee for trading on the FastMatch platform.
The analogous business model to this, according to Galinov, is Facebook.
Integral Development has cut the fee for trading on its OCX trading platform effective immediately.
The technology provider says it will charge a flat fee of $2.75 per million, in addition the firm says it will not charge third party additional fees, port fees or market data fees.
“Our new pricing model for OCX does even more to improve the economics of running an FX business, providing a repeatable advantage in pricing and liquidity in an era of otherwise decreasing margins and increasing competition,” says Harpal Sandhu, founder and CEO of Integral.
Prime brokerage has had an interesting relationship with the FX market – after the initial burst of excitement when it first launched in the late 1990s, the middle years of the first decade of this century saw a growing consensus that it was a good idea that had, had its day.
Generally speaking, PB customers were restricted to dealing on a bilateral basis with the major banks, so while there was undoubtedly some benefit involved, the value proposition wasn’t one that lent itself to continued growth.