Earlier this year Euronext announced the rebranding of FastMatch, its Electronic Communication Network for FX trading, into Euronext FX. e-Forex spoke with CEO Kevin Wolf to find out more about the evolution of FastMatch and his plans for the future.
FastMatch was seen as an industry disruptor thanks to its award-winning technology.Why was the decision taken to rebrand the firm?
The rebranding shows Euronext’s commitment to its FX franchise, and reflects the numerous areas in which we work closely with and benefit from the rest of Euronext. Our clients derive comfort from Euronext FX being owned by a large exchange operator that excels in operating several regulated and transparent marketplaces. The FastMatch name represented the core ECN, with the early adopters, mainly the sophisticated trading firms, attracted to the speed of the platform. The FastMatch name lives on as the same technology still underpins our matching engine. Euronext FX is still very much an industry disruptor, but with a more comprehensive product suite and a broader spectrum of clients, it was a logical step to rebrand.
As you’ve mentioned, the growth of FastMatch was mainly driven by the professional trading community. Where will the focus of Euronext FX be in looking to grow the business and attract new clients?
There is still a large part of the market which cannot get direct access to liquidity because of credit constraints. With most of the professional trading community (banks, non-banks, proprietary firms and retail brokers) now accessing our venue, broadening the mix of our clients is crucial – one key area for potential growth is the buy-side. We already have Systematic Hedge Funds trading on the platform, and the next steps are to focus on Asset Managers, Asset Owners and Corporates. For them, direct access to our ECN is a challenge, since they don’t currently have prime brokers. Therefore, we’ve had to craft creative solutions to enable them to access our liquidity.
Our Singapore presence will give us a stronger foothold in the Asia Pacific region
How much traction has your Sponsored Access model been getting and why do you expect to see increased demand for more bespoke liquidity pools?
Algo usage amongst the buy-side community has seen year on year growth, however it has fallen short of universal adoption because of the lack of clarity and control over who the end recipient of the workflow is, resulting in concerns over information leakage and signalling risk. Euronext FX Sponsored Access, which allows buy-side clients to access the ECN via 3rd party bank algo providers, addresses these concerns. The buy-side use their existing infrastructure to access a preferred algo strategy with their chosen counterparty, but then route solely to their own liquidity pool within our ECN. This approach does not require any additional documentation or agreements to be put in place, thus reducing delays to trying this trading approach. The term ‘bespoke liquidity’ is used by many venues and can have many different connotations. We use it in reference to the composition of the liquidity pool and matching logic specific to the clients and their trading style. Going back to my earlier point – giving full control to the end user.
We have a team of liquidity managers who work with our clients to determine preferred execution, creating different liquidity pools and matching styles depending on the algo strategy or currency pair, leaning heavily on advanced data analysis.
Managing market impact is critical for the effective execution of a large order, and we have the tools in place to help our clients achieve this. ‘Flexible Matching’, our smart order router, directs flow to LPs who have a low market impact, whilst our post-trade analytics provide the extra granularity around the interactions on any given order. Asset Managers appreciate the fact that we hold their hands every step of the way, to create an experience that works for them.
With regards to your product suite, it seems market data is another area you’re focused on, with the Euronext FX Tape® providing real time aggregated FX last trade data from a variety of contributors. What did you set out to achieve with this streaming service and what key benefits do consumers get from it?
Providing transparency to the market has always been at the forefront of everything Euronext FX does. It seemed like a logical step to distribute data in the same way. We took the concept of the exchange based multi-contributor ‘Consolidated Tape’ and applied it to FX. Due to increased levels of transparency, FX Spot data is far more accessible than it has ever been, but while most of our peers are focused on top of book price and direction, we also wanted to focus on actual trade volume data, thus giving a better reflection of market depth– and with an average daily spot volume of around $100bio – the FX Tape is a very large ‘live’ volume data set for its consumers. It can be very useful for data analysts, especially in anticipation of ‘Black Swan’ events.
The FX Tape can also be used as an effective tool in benchmarking performance, for trading teams, and as an FX oversight tool. The $100bn average daily transacted volumes and the constantly streaming ECN mid-price combined deliver a unique product.
Euronext FX has opened an office in Singapore and is also establishing a matching engine there. Why did you choose Singapore and how ambitious are your growth plans across the APAC region?
Singapore is now the third largest global FX trading centre (after NYC and London), with the MAS, the Monetary Authority of Singapore, now promoting the growth of a local e-FX infrastructure. We have clients in place, ready to price out of Singapore from day one, and are making strategic hires to help grow the business. Our Singapore presence will give us a stronger foothold in the Asia Pacific region (we already have a matching engine in Tokyo, which services the local clients there), and it is the next step in the evolution of Euronext FX.