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rapidfire


Total Posts: 5
Joined: Dec 2012
 
Posted: 2017-05-13 13:12
Have a few thoughts wanted to ask practitioners in this space.

(1) The MQLs are still fairly high on EBS/Reuters. The fill ratio rules also appear to benefit takers vs makers. What does this actually accomplish?
(2) Without last look, how many banks can actually survive in providing competitive e-fx prices, esp if every end user can also access firm nonbank liquidity?
(3) Can the secondary venues (hotspot, fastmatch, etc) become primary? Has this already occurred in some pairs?


FDAXHunter
Founding Member

Total Posts: 8335
Joined: Mar 2004
 
Posted: 2017-05-15 09:45
1. There is ample competition among market makers, and EBS/Reuters realize that to keep going you not only need market makers, but also market takers. They are able to skew the market towards takers because the market makers don't have a choice but to agree or be eliminated from the competition.

2. You rightly observe that most banks will be unlikely to compete without the additional edge conferred by "last look". I don't know that we can put a number on it, but the vast majority of them will struggle. Having said that, they have the advantage that a good portion of the order flow they serve is actually captive to them, so they will enjoy at least being able to get in front of everyone else (albeit at the same competitive price).
There aren't any banks that can really be competitive in equities market making, so why would this differ in foreign exchange, assuming you take the market structure to a similar model (centralized limit order book trading).

3. Can this happen? Sure it can. How likely is it? I don't think it's very likely. You have to ask: what real advantage do these platforms have over the incumbents? And the answer is: Not a lot. They are all electronic platform with not dissimilar capabilities. So the main differentiation factor can be cost, but that's obviously something that they can compete on. If one of them starts making major inroads, the others will respond by adapting their cost structure. Again, the equity trading landscape provides the playbook here.

The Figs Protocol.

svisstack


Total Posts: 300
Joined: Feb 2014
 
Posted: 2017-05-15 10:31
what MQL stands for?

Time well wasted.

FDAXHunter
Founding Member

Total Posts: 8335
Joined: Mar 2004
 
Posted: 2017-05-15 10:36
"Minimum Quote Life", a number indicating how long an order must remain in the orderbook before becoming eligible for modification or deletion.

The Figs Protocol.

svisstack


Total Posts: 300
Joined: Feb 2014
 
Posted: 2017-05-15 10:57
thanks

Time well wasted.

Luciender


Total Posts: 73
Joined: Aug 2008
 
Posted: 2017-05-15 14:07
ad 3: apparently there is a bit of a shift from anonymous to bilateral/disclosed multidealer platforms going on since a few years. EBS Direct and FxAll (Reuters) being the incumbent products. Not sure what the competition does have to offer in that segment. Also firm liquidity vs. last look does not seem to be much of a factor there, since they know the ctpty/flow characteristics and thus can do less rejections.

lmog


Total Posts: 120
Joined: Mar 2010
 
Posted: 2017-05-18 22:10
I left eFX many years ago, it looks like things went the way they looked like they were going. There were a few outfits saying they were going to provide algo trading (outside of banks), though I never understood how it made any sense since they didn't really need to provide an auditable set of orders. The bank seemed to be offering it as a product to dumb customers.

rickyvic


Total Posts: 117
Joined: Jul 2013
 
Posted: 2017-05-19 11:22
Speaking of last look. It is not clear to me, meaning that different people in the business told me different things, if ECNs allow last look.
One told me they advertise no last look but then they allow it anyway, after looking at the rejections they had.
Another one they all allow it, especially EBS.
I have no high volume execution experience (yet) so it is hard for me to say, any idea?

"amicus Plato sed magis amica Veritas"
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