Tag: Market Making

Market Making

Flow Traders Targets FX Expansion

Flow Traders, a Netherlands-based liquidity provider that specialises in exchange traded products (ETPs), is making a concerted push into the FX market, the firm has revealed today.

Flow Traders is partnering with MarketFactory to trade FX directly with investors across a number of different trading venues. In a release issued today the firms says that MarketFactory’s API product, Whisperer, its “strategic ambitions” to become a leading liquidity provider in FX.

Flow Traders has long been active in the FX as part of its hedging strategies, but the firm claims that the current state of the FX industry provides an opportunity for it to further expand its role in this market. 

And Another Thing…

Earlier this year I wrote about my mystification over people bemoaning the lack of opportunity in FX markets, claiming there were indeed plenty of chances to make (and lose!) money, because the rather fragile geo-political situation and multi-speed economic performance around the world is providing opportunities.
In FX terms market conditions seem to have changed for the better, at least for some participants. We could be witnessing a revival for the trader, and if that is the case I, for one, will be very happy.

And Finally…

More than six years ago I started talking about high frequency trading “eating itself” and the latest deal in this world seems to suggest the feast is well underway. Rather than seeing this, as many media outlets do, as being driven by lower volatility and volume in markets, I think it is more about competition. And nowhere is this competitive impact better highlighted than in the story of the planned building of two radio masts on the coast of England.

EM Currencies Offer Opportunity for FX Market Makers

Market making in emerging market currencies is a key way for liquidity providers to differentiate themselves in an increasingly competitive G3 landscape, says Kevin Kimmel, global head of e-FX at Citadel Securities.

“Where there’s a lot of demand and where there’s also an opportunity to differentiate yourself as a liquidity providers is in the less liquidity currencies, in the Scandies, in Ems, where you don’t necessarily have as many people with really tight top of book liquidity,” he comments

In contrast, G3 spot FX market making has become so commoditised and the pricing is so tight already that Kimmel says that he is unsure whether a new market maker pricing just these currencies would really add significant value to the overall FX ecosystem.

A New Interpretation of The Sterling Flash Crash

Closer scrutiny of the data associated with the sterling flash crash reveals some surprising results, argues Paul Aston, CEO of Tixall Global Advisors.

Speaking after delivering a presentation at Profit & Loss’ Forex Network New York conference, Aston explains that his firm replicated the environment of the FX market during the sterling flash crash on a simulator.

“In the course of doing that you have to get very close to the data, analyse every tick, and what we discovered was it really wasn’t the headline grabbing price movement that we saw in the flash crash, where you’re printing all the way down to 1.13 handles, it was right before that which was the most surprising bit of data,” he says.

Assessing the Cost of Regulation

Although much is said about the rising cost of regulation in financial markets, there have been few attempts to empirically demonstrate the impact.
A new Staff Working Paper published by the Bank of England, entitled Dealer intermediation, market liquidity and the impact of regulatory reform, and written by Yuliya Baranova, Zijun Liu and Tamarah Shakir, seeks to assess the impact and finds that while the cost of regulation is higher in stable market conditions, in periods of stress benefits accrue.

What Do Clients Want From Their Liquidity Providers?

Shortly after Citadel Securities won the Best Market Maker in Major Currencies category at Profit & Loss’ The FoXys Reader’s Choice Awards, Kevin Kimmel, global head of e-FX at Citadel Securities, sat down to discuss what firms want from a modern liquidity provider.

“I think it’s important for market makers to customise their liquidity to each individual consumer,” says Kimmel.

Although he acknowledges that “market impact” has become something of an industry buzzword recently, Kimmel maintains that there truly is a large segment of the liquidity consumer universe that is looking to trade with firms that are willing to warehouse risk because it will help minimise their market impact. There is also though, he says, clients that are much more aggressive in accessing the market that just want tight prices and a high fill rate.

Report: Top Dealers Loosen Grip on FX Market (Slightly)

The top five FX dealers are losing market share, according to a new report from Greenwich Associates.

Although the world’s five biggest FX dealers still capture a massive 44% of global market share in aggregate, according to the research, that proportion is down from 48% last year and from 53% in 2013.

The report identifies several trends that are driving these changes. It says that while top-tier dealers have been narrowing the scope of their product, regional and client coverage, FX investors continue to increase their trading via multi-dealer platforms, which create a more level playing field for liquidity providers.

Blurred Lines: The New Face of Market Making

As the distinction between bank and non-bank liquidity continues to blur in FX, panellists at Forex Network New York discussed how market participants should differentiate between different liquidity providers.

Speaking at the event, Kevin Kimmel, global head of e-FX at Citadel Securities, claimed that when it comes to liquidity, the bank versus non-bank narrative “has played out” as a distinction between market makers, with clients instead focusing on the core attributes of each firm, such as their reliability and whether they warehouse risk.

The FoXy’s: Profit & Loss Readers’ Choice Awards

Profit & Loss readers cast large numbers of votes this year for their preferred market makers and service providers.

Last year was the first that we changed the category description from banks to market makers to account for the larger proportion of non-banks that now comprise an important part of market making, and this is again reflected in the results.

The industry’s changing dynamics are starting to show. Voting, which spanned across time zones, was close in many categories, so we have listed the top three for each category to acknowledge the runners up.