UBS Goes Live Globally On FXSpotStream as the 8th Liquidity Provider and Commences Client Trading

UBS Goes Live Globally On FXSpotStream as the 8th Liquidity Provider and Commences Client Trading

FXSpotStream LLC, a wholly owned subsidiary of LiquidityMatch LLC, today announced that UBS is now live as a liquidity provider bank to FXSpotStream’s price aggregation service from FXSpotStream’s sites in New York, London and Tokyo and client trading with UBS via the service has commenced. UBS is the 8th bank available to clients connected to FXSpotStream’s service. UBS adds to the liquidity available from FXSpotStream’s existing liquidity providers, which include BofA Merrill Lynch, Citi, Commerzbank AG, Goldman Sachs, HSBC, J.P. Morgan and Morgan Stanley. The majority of LiquidityMatch shareholders are also liquidity providing banks of FXSpotStream.
Alan F. Schwarz, CEO, stated: “FXSpotStream has deployed a resilient global infrastructure and solution that allows us to on board liquidity providers and clients rapidly and in a very efficient manner. As a result, and with the technology supported by smartTrade Technologies, we were able to take UBS live globally less than 2 months after UBS signed up to become a liquidity provider to FXSpotStream’s clients and client trading over the service with UBS is underway. Since we launched in late 2011 we have remained focused on growing the number of liquidity providers and clients on FXSpotStream and enhancing the offering by adding client driven functionality, which will include a GUI planned to be in production later this quarter.”

FXSpotStream provides a multibank FX aggregation service to clients for the purpose of executing Spot FX trades. Banks connected to FXSpotStream serve as liquidity providers to clients. FXSpotStream functions as a market utility, providing the infrastructure that facilitates the multibank API and associated routing mechanism to route trades from clients to liquidity providers. Clients access a single API from co-location sites in New York, London and Tokyo and have the potential to communicate with all liquidity providing banks connected to the FXSpotStream solution. FXSpotStream does not charge brokerage fees to clients or liquidity banks.

Chris Purves, Managing Director and Global Head of FX E-Trading at UBS, added “We have been impressed with the service delivery from FXSpotStream. Not only are we live globally streaming prices but client trading via FXSpotStream has already started. The FXSpotStream service has been well received by our client base and we look forward to realizing the cost savings that will allow us to improve the pricing we ultimately show on to our clients.”

“FXSpotStream’s progress remains on track and the company has accomplished a great deal in a very short period of time,” said Fergal Walsh, Head of FX eTrading at Citi. “The quick on boarding of UBS is consistent with the experience we and our clients have seen from the service, which allows us to transact with our clients on a bilateral, fully disclosed and cost effective basis.”

What factors should investors take into account when connecting to a trading venue?

First, investors must consider which liquidity providers are operating on the venue and whether they match their risk appetite. Investors must also question whether the trading venue adds anything new to their existing range of liquidity sources. If an investor connects to too many trading venues, their flows are going to be much more complicated to manage and the relationship with each liquidity provider will be diluted. There must be added value in connecting to a new liquidity source.

Investors must also take into account the fees charged by the trading venue. Some venues do not charge liquidity providers whilst others do, and this will be reflected in the spread that they will receive. It is worth noting that some technology providers also charge liquidity providers whereas others such as smartTrade do not and that will also have impact on price seen.

Additionally, they have to consider the range of trading options possible on a particular venue, for example, whether there is ‘last look’ on certain prices. Spreads tend to be tighter with ‘last look’, and even firm pricing venues can give rejections when the price moves suddenly. That is why it is important to understand the behaviour of a trading venue.

Finally, the venue location is an important consideration on the trading venue choice. The distance to the venue may create an issue by adding latency to trading operations leading to slippage and rejections.

Why are pre-trade analytics and transaction cost analysis (TCA) increasingly important for currency investors?

Investors often focus on spread and depth when looking at the FX market, but the cost of executing a trade – for example in terms of slippage, rejection, and market impact – can often be far more important.

Pre-trade analytics and TCA provided by companies such as smartTrade allow investors to fine tune their execution strategies allowing them to maximise price improvement, monitor general liquidity provider performance and reduce the increased cost of trading from slippage.

Without the insight offered by advanced pre-trade analytics and TCA capabilities, incorporating artificial intelligence and machine learning, investors are almost trading in the dark and hoping for the best.
Historically, this advanced level of fine tuning was not always a key focus, but as the FX market has become more competitive, every area of profit and loss improvement must be considered.

How can currency investors ensure transparency in their trading operation in order to satisfy regulatory concerns?

The only way to do that is to rely on a very strong technology backbone, which has been designed to meet regulatory requirements, such as our LiquidityFX and smart-Analytics products.  This gives investors the capability to prove best execution, giving them the capability to capture all the different ticks of data during the trade process and during execution.

This is important as MiFID II comes into operation, as investors will need to be able to explain at the microsecond level what happened to each of their orders and trades. Investors need to be able to capture all the market data, and when they have that stored and secured in one place, they can write all the reports they need be compliant with the regulations.

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