What is FX Distribution Hub?
DealHub’s FX Distribution Hub offers banks and brokers a fast and cost effective way to get their liquidity to any FX trading destination, meeting the most demanding performance criteria, without tying up scarce internal development resources. It’s a fully hosted and managed service that takes care of not only the physical connectivity needed to reach venues, but also the complex logic required to shape a bank’s liquidity to comply with the unique trading characteristics of each platform.
Why did DealHub feel the time was right to launch this new service?
2012 saw the start of a period of great upheaval in the FX trading landscape, with new venues appearing almost every month and the established ECNs merging and evolving rapidly to remain competitive. We launched FX Distribution Hub as a service to help our customers keep pace with this change and manage overheads in a world where controlling costs is still a top priority – and so far, the demand has been very strong.
How would you summarise the cost and efficiency benefits that FX Distribution Hub offers to customers?
It is very expensive for banks to establish and manage connectivity to the ever increasing number of ECNs, not to mention their single bank platforms and direct API customers. It’s not just a question of the physical connectivity and infrastructure – there’s a huge amount of complexity in the software required to convert a bank’s core pricing into the right format and structure, and to manage the specific trading rules for each venue. So as well as providing the entire infrastructure, we have developers who do nothing but build and refine pricing adaptors, day in day out. We take away all of that overhead from our customers.
FX Distribution Hub also dramatically cuts time to market for pricing to a new venue. For many banks, building a new pricing connection in-house is a multi-month undertaking, fighting for priority with every other project. Using FX Distribution Hub, our customers can have live pricing in a new venue in just a few weeks – we’ve spent years building connections to the vast majority of venues and we have the expertise and resource on-tap to build anything bespoke or new very quickly.
All this reduces costs and frees up internal developers to concentrate on core pricing platforms – which is where a bank can really differentiate and create competitive advantage.
What analytics are available within FX Distribution Hub to help customers improve their pricing and infrastructure performance?
This is another key benefit of the Hub – we can offer built-in performance analytics as an integral part of the solution. We track and report the latency of each operation in a customer’s pricing workflow, helping them understand and isolate latency issues and improve their infrastructure performance. We can also report on trading activity and client flows in real time and across multiple ECNs - hit ratios, trade rejections, profitability by client or currency pair, to name just a few examples. This sort of intelligence allows customers to optimise their trading operations in real time – it’s incredibly powerful.
How does FX Distribution Hub integrate with a Bank’s existing infrastructure and what steps are required to get that pricing to multiple trading venues?
We integrate once from a Bank’s core pricing platform to our hub. From there we apply specific trading logic for each ECN that a bank wants to connect to. This configurable logic interprets the nuances of each ECN, shaping the bank’s liquidity for optimum performance and managing requests back to the core price engine for quotes or streaming prices as required. Fills are communicated back via the Hub and DealHub’s dedicated STP infrastructure handles the post trade workflow.
Where is the FX Distribution Hub hosted and how have you catered for banks that may still wish to retain all infrastructure in-house?
The Hub is hosted in Equinix’s LD4 (London) and NY4 (New York) datacentres, co-located with many of the FX industry’s leading participants and execution venues. This, alongside our very high performance software, ensures the lowest possible latency on all pricing. Plans are in place to launch an Asian hub in the coming months. Some Banks still prefer to retain all infrastructure in-house, so we can install a locally deployed and managed version of the Hub if needed.
Can FX Distribution Hub be extended beyond its core price distribution capability?
The Hub is built to integrate seamlessly with the full stack of DealHub trade-lifecycle solutions, so it’s easy to extend the service to cover any aspect of the eCommerce workflow, from credit management and price tiering, to STP and processing blocks and allocations. The technology is also compatible with any existing in-house or third party infrastructure, allowing customers to build a bespoke eCommerce solution that offers real differentiation. It’s incredibly flexible.
Although the Hub was only launched at the end of last year what feedback have you had from banks using the service?
We’ve had a great response since launch. There’s a huge appetite from Banks who have invested heavily in a high performance pricing infrastructure to get that liquidity out to as many venues as possible. FX Distribution Hub slots neatly into their existing eCommerce stack, efficiently expanding distribution and amplifying that initial investment.
Our latency analytics have quickly proved invaluable – one large bank customer was able to isolate and fix a number of issues in their infrastructure and distribution, significantly improving their ranking on a major ECN.
Customers are also finding that the service is helping them keep on top of the constant software and rules updates required as a result of changing markets and regulations. Recently, we’ve been doing a lot of work on our pricing adaptors to manage the new obligation to publish mid-rates to US customers as part of the Dodd Frank business conduct rules. Each venue is approaching this differently, so that’s a lot of complexity for banks to manage individually – to a strict deadline of 1st May 2013. We’re taking all that pain away.
A final thing that our bank customers and trading venue partners particularly appreciate is our neutrality. In a market where the boundaries between trading platforms, brokers and banks are increasingly blurred, we are a genuinely neutral technology provider. We don’t compete with our customers, or make it easier for others to compete with them. We just make it easy for banks to expand their distribution and enhance trading profitability.