Unveiling the Future of Retail Trading Liquidity: FMLS:23

by

The annual
Finance Magnates London Summit 2023 included an expert panel discussing the
current liquidity landscape for retail trading brokers. The panel covered
topics around accessing deeper liquidity pools, innovations in liquidity
operations, competition in the prime of prime (PoP) space, and whether banks
are opening up to working with retail trading firms.

Moderated
by Hormoz Faryar, the Managing Director of Institutional at ATFX, the panel
featured industry experts including Phillip Spurgeon, the UK Branch Director at
B2Prime, Andreas Kapsos the CEO of Match-Prime Liquidity, Ben Robson, the Head
of Institutional EFX at Swiss Finance Corporation, and Alexei Jiltsov, the Co-Founder
at Tradefeedr.

Impact of Geopolitical
Events

Phillip Spurgeon

The panel kicked
off with a discussion on the impact of geopolitical events, such as the
escalation between Israel and Gaza in October 2023. Phillip Spurgeon noted the
defensive pricing by market makers and widening spreads, particularly in
commodities like gold, during geopolitical tensions.

“What
we notice with any geopolitical tensions, they always lead to uncertainty in
the markets. As a company, we saw market makers pricing defensively, we noticed
spreads widening, particularly on commodities, particularly on gold as well,”
said Spurgeon.

This
sentiment was echoed by Andreas Kapsos, who highlighted how such events lead to
protective liquidity strategies, triggering arbitrage opportunities. “It
is very often that we have events like this during the financial year.
Obviously this one outshines the rest of it. The specific event happened on Saturday,
so that allowed the market a bit of time to react during the opening.”

Internalization With
A-Book vs B-Book Models

A
significant part of the discussion revolved around the A book and B book models
in retail trading. Spurgeon emphasized the importance of a hybrid model,
balancing risk management and selecting the right liquidity provider. Kapsos
shared a perspective on regional differences, noting the varied success of B
book strategies in different markets.

Andreas Kapsos

Alexei
Jiltsov pointed out that 2023’s lower volatility compared to 2022 implied a
more directional market, affecting both A book and B book strategies. He
stressed the importance of client management in liquidity strategies.

“Firstly,
the market might be more directional, with potentially less uncertainty.
Secondly, there’s a chance that retail traders occasionally make accurate
predictions,” said Jiltsov. “However, this greatly depends on the client
profile. In cases where trading is highly directional and concentrated on just
one or two assets, there’s a higher risk of getting caught out, especially if
these assets have strong consensus views.”

Ben Robson

In
preferring the A book flow, Ben Robson highlighted the influence of factors
like balance sheet strength, client base, and leverage on these models.

“B book
does have its advantages, but I agree with Phil that the balance sheet plays a
significant role. The location of the brokerage’s domicile is also crucial. The
client base and the economies of scale and leverage are important factors,” Robson
added.

Evolution of Retail
Trading Platforms

The
discussion then shifted to trading platforms, with a focus on the dominance of
MT4/MT5. Andreas Kapsos noted the increasing demand for alternative platforms
and technology solutions, particularly in the wake of MetaQuotes’ decision
regarding white labels.

The
changing dynamics around trading platforms have direct implications on
liquidity and broker strategies. Kapsos observed that more startup brokers, now
exploring alternatives to MT4/MT5, are considering A book strategies from the
outset. This is a departure from the traditional approach of initially focusing
on B book models.

The panel
concluded with a forward-looking perspective on liquidity management,
acknowledging the complexity of factors influencing it, from geopolitical
events to technological advancements.

A Fraud Survey

We invite you to participate in our joint survey conducted by FXStreet and Finance Magnates Group, which explores prevalent online financial fraud types, platforms used for fraudulent activities, effectiveness of countermeasures, and challenges faced by companies in tackling such fraud. Your valuable insights will help inform future strategies and resource allocation in combating financial fraud.

Social Media Scams: Help Shape the Fight with Your 2024 Survey Participation.

The annual
Finance Magnates London Summit 2023 included an expert panel discussing the
current liquidity landscape for retail trading brokers. The panel covered
topics around accessing deeper liquidity pools, innovations in liquidity
operations, competition in the prime of prime (PoP) space, and whether banks
are opening up to working with retail trading firms.

Moderated
by Hormoz Faryar, the Managing Director of Institutional at ATFX, the panel
featured industry experts including Phillip Spurgeon, the UK Branch Director at
B2Prime, Andreas Kapsos the CEO of Match-Prime Liquidity, Ben Robson, the Head
of Institutional EFX at Swiss Finance Corporation, and Alexei Jiltsov, the Co-Founder
at Tradefeedr.

Impact of Geopolitical
Events

Phillip Spurgeon

The panel kicked
off with a discussion on the impact of geopolitical events, such as the
escalation between Israel and Gaza in October 2023. Phillip Spurgeon noted the
defensive pricing by market makers and widening spreads, particularly in
commodities like gold, during geopolitical tensions.

“What
we notice with any geopolitical tensions, they always lead to uncertainty in
the markets. As a company, we saw market makers pricing defensively, we noticed
spreads widening, particularly on commodities, particularly on gold as well,”
said Spurgeon.

This
sentiment was echoed by Andreas Kapsos, who highlighted how such events lead to
protective liquidity strategies, triggering arbitrage opportunities. “It
is very often that we have events like this during the financial year.
Obviously this one outshines the rest of it. The specific event happened on Saturday,
so that allowed the market a bit of time to react during the opening.”

Internalization With
A-Book vs B-Book Models

A
significant part of the discussion revolved around the A book and B book models
in retail trading. Spurgeon emphasized the importance of a hybrid model,
balancing risk management and selecting the right liquidity provider. Kapsos
shared a perspective on regional differences, noting the varied success of B
book strategies in different markets.

Andreas Kapsos

Alexei
Jiltsov pointed out that 2023’s lower volatility compared to 2022 implied a
more directional market, affecting both A book and B book strategies. He
stressed the importance of client management in liquidity strategies.

“Firstly,
the market might be more directional, with potentially less uncertainty.
Secondly, there’s a chance that retail traders occasionally make accurate
predictions,” said Jiltsov. “However, this greatly depends on the client
profile. In cases where trading is highly directional and concentrated on just
one or two assets, there’s a higher risk of getting caught out, especially if
these assets have strong consensus views.”

Ben Robson

In
preferring the A book flow, Ben Robson highlighted the influence of factors
like balance sheet strength, client base, and leverage on these models.

“B book
does have its advantages, but I agree with Phil that the balance sheet plays a
significant role. The location of the brokerage’s domicile is also crucial. The
client base and the economies of scale and leverage are important factors,” Robson
added.

Evolution of Retail
Trading Platforms

The
discussion then shifted to trading platforms, with a focus on the dominance of
MT4/MT5. Andreas Kapsos noted the increasing demand for alternative platforms
and technology solutions, particularly in the wake of MetaQuotes’ decision
regarding white labels.

The
changing dynamics around trading platforms have direct implications on
liquidity and broker strategies. Kapsos observed that more startup brokers, now
exploring alternatives to MT4/MT5, are considering A book strategies from the
outset. This is a departure from the traditional approach of initially focusing
on B book models.

The panel
concluded with a forward-looking perspective on liquidity management,
acknowledging the complexity of factors influencing it, from geopolitical
events to technological advancements.

A Fraud Survey

We invite you to participate in our joint survey conducted by FXStreet and Finance Magnates Group, which explores prevalent online financial fraud types, platforms used for fraudulent activities, effectiveness of countermeasures, and challenges faced by companies in tackling such fraud. Your valuable insights will help inform future strategies and resource allocation in combating financial fraud.

Social Media Scams: Help Shape the Fight with Your 2024 Survey Participation.

Source link

Related Posts

Leave a Comment