Foreign exchange trading platforms are pitted against each other in a competition to provide best liquidity for their users. It is a race contested under demanding market conditions. The course involves endless high-speed laps comprising:
- consumption of executable quotes from many sell-side liquidity providers,
- streaming quotes in real-time from sell-side to buy-side,
- waiting to receive buy-side order instructions,
- return delivery of orders for execution before the quote expires.
There are lots of tight twists and turns en route, plus the occasional hairpin, to intensify the challenge. The parallels with motorsport are apt and we can gain invaluable design inspiration from race engineering. To be competitive, teams in either discipline need to understand the impediments to success and apply radical technical solutions to overcome them. The obstacles in forex are as follow.
The race is crowded. FX is the world’s largest financial market, so publication rates are huge. Platforms disseminate billions of price ticks per day. The volume is uneven, with many peaks and dips that build to a crescendo during the overlap of London and New York trading. Traffic is particularly high during news events, such as non-farm payroll, when it can surge tenfold.
We are up against the clock. Quotes are valid only for a limited time. Orders placed against stale prices are routinely rejected at last-look. The lifetime of an executable quote is ephemeral, and grace periods have narrowed over the years from seconds to fractions of a second.
The road is long. FX dealers are clustered in London, New York and Tokyo but the buy-side clients are globally distributed, necessitating lengthy Round-Trip-Times (RTT). We can shave off milliseconds by keeping to the racing line, and selecting the most direct network routes, but the benefits gained are negligible.
Too much weight is carried at the outset. The FIX protocol is the standard for financial information exchange. Most dealers adopt FIX for both transactions and quote streaming, although it is verbose and too bulky for pricing. Exacerbating this problem are additional fields mandated by MiFID-II.
The infrastructure has bottlenecks. TCP is the principal transport layer for FIX. The maximum throughput of a TCP socket is inversely proportional to RTT, irrespective of how much bandwidth is provisioned (long fat pipe problem). It is therefore impractical to drive high-volume FIX traffic over long distances.
FIX pricing is sustainable only over short hops, so it is essential to ride local links. That requires datacentre collocation with the sell-side price engines. Any solution lacking a setup in LD4, NY4 and TK3 will fail to qualify for the main event. To get smartly over the starting line, forgo leased lines and opt instead the gigabit bandwidth and sub-millisecond latency offered by cross-connects.
The speedway is no place for general purpose vehicles. No one would race a Grand Prix in an SUV, and likewise, no one should contest FX with a message bus or text-based format. The professional racer opts for a light-weight, carbon fibre, monocoque chassis around a turbocharged, fuel injected drive system. FX EMS adopt bespoke binary protocols and processes designed specifically for driving FX data. We might be obliged to use FIX connectivity with brokers but we convert FIX to binary straight off of grid. The binary protocol is the powertrain that delivers momentum through the long sections of the circuit.
Precise handling and control are equally essential to attain poll position. Successful teams custom engineer effective software for streamlining message flows. The common publish and subscribe model fails to cut muster in today’s revved-up market as it is prone to overflow during volatile trading, causing congestion and packet collisions. It also lacks the feed-back that EMS Ops need to analyse real world usage. BidFX engineers developed a real-time price synchronisation algorithm that solves these issues. Rather than driving quotes, hammer-down into stationary traffic, it models the live state of the market and continually synchronises its state with clients. The synch frequency is independent of the quote reception rate. The algorithm uses adaptive conflation to fine-tune its handling for each client and to changing load characteristics. Critically, it also provides all of the telemetry that we need to accurately monitor system performance.
Race drivers slow down and queue as they negotiate a chicane. Messages queue up when there is network congestion. Whereas chicanes are laid intentionally to enhance the enjoyment of the spectacle, data-queues are often the result of bad programming. Queues are amongst the most misused data structures in computing. They are intended to smooth flows to constrained resources, but we often find them sat inappropriately between real-time components. A queue is a time machine. A DeLorean, if you like, with its transmission stuck in reverse, presenting a moving window onto past events. Old quotes have no value to traders and can result in the ultimate race penalty: order rejection. BidFX use queue-free algorithms to reduce lag and improve fill rates.
Car mechanics fine tune engines to boost their power. FX EMS engineers tune data to improve network utilisation. Best throughput is gained by using fewer, larger network packets. To shed load, we strip unnecessary fields, eliminate duplication and compress aggressively. BidFX apply a slipstreaming technique that aids compression. Just as racers reduce drag when bunching up, so do quotes. Packing several quotes in a single structure gives it the properties of a peloton, where the effort exerted by followers is eased by the leaders. The redundancy found in a large pack of competing quotes, for a subset of currency pairs, is considerable and it affords excellent compression. As a measure of the power of this strategy, BidFX price streams use 80 times less bandwidth than equivalent FIX traffic. Eighty times more throughput puts us on the inside line to a top podium spot.
Further gains can be had by running multiple concurrent synchronisations. If the buy-side is in Singapore and the sell-side, 3300 miles away, in Tokyo then the RTT will be near 80ms. If we waited for the packed peloton to complete a full lap before the next resync, then we could only update the trader’s display twelve times per second. Instead, we could run with five equally-spaced packs, giving 60 refreshes per second. Our engine needs plenty of torque to cope with variable conditions. Course length and capacity differ by client, and congestion changes over time. So, we added the flexibility to adjust the resync interval dynamically as needed to ensure all clients see the latest prices refreshing at the highest rate their infrastructure will bear.
These techniques place significantly less load on networks, improve throughput and keep everyone at pace with the market. Consequently, all clients cross the line to take the chequered flag on the BidFX EMS. To see for yourself, buckle up and take us for spin.
Paul Sweeny (
BidFX, a TradingScreen Company, enjoyed market leading ADV growth of 116% in July YoY. This was driven by both new client adoption as well as growth from the existing franchise. EMEA, APAC, and The Americas all contributed to these positive results.
The growth is especially impressive when evaluated against the backdrop of much lower July YoY ADV results announced by other competitor platforms in the space. Also noteworthy is BidFX’s July MoM ADV growth of 15.2% compared to the other platforms’ declining ADV in July MoM.
BidFX continues to differentiate itself through innovation and a nimble response to the FX Market’s continually evolving needs. We address execution, workflow, and regulatory requirements proactively to keep pace with the changing landscape of the market.
We will remain committed to this strategy and feel it will yield more satisfied clients as well as continued growth in market share and ADV.
Thomas G. Mullooly
Head of Sales, Americas
T +1 212 359 4072
M +1 917 650 4655
BidFX Algo Hub bullet points
· Best of Breed Hub for Algo Execution
· No Development and Infrastructure Costs
· Helps towards regulatory concerns with solutions to increase transparency
BidFX’s recent growth has been exponential in terms of volumes and clients and is driven by innovative solutions delivered to an increasingly complex eFX market. The evolution within the eFX market in conjunction with the increased regulatory framework has led to many of our clients looking for more sophisticated execution mechanisms. We delivered this by working with our Liquidity Providers to provide an Algo Hub service to clients.
BidFX currently has 13 Global Bank Liquidity Providers providing their Algo services on the BidFX Algo Hub and our customised solution is helping clients reduce transaction costs/market impact, address regulatory and transparency concerns as well as accessing additional liquidity and delivering increased time efficiency. In an increasingly fragmented electronic market Algos are one way we see that can help clients, by giving them tools to address this market, by automating best practices, presenting solutions and reducing time inefficiencies.
For more information on the BidFX Algo Hub and how to access it please contact your local BidFX salesperson firstname.lastname@example.org
As we look back of the days of cigarette smoke filled trading rooms, with arms waving for ‘bids’ & ‘offers’, where a blue shirt just wasn’t ‘cricket’ as they say, we’ll realise just how far we have come with the advent of technology, and just how far trading has evolved as a result. Every coin has two sides though, so whilst processes have become exponentially more efficient, unfortunately there has been a toll taken on sell side headcount in particular, with quants taking the places of elements of sales & trading, as pricing engines take control progressively. That’s all very much known and understood from the sell side, but from the buy side, we’re seeing a steady shift, even from the most traditional sides of the marketplace. The old adage of ‘$500 mine… if you buy me lunch’ clearly has evaporated in the age of regulatory scrutiny, best execution & Mifid II. Instead we’re seeing a shift relatively in line with this: phone –> screen -> Algos -> API -> machine learning -> where next?
Now it seems relatively clear that long only clients are moving towards centralised dealing desks, becoming execution desks that cater for Equites, Futures, FX & Fixed Income as one team, be it multi region or not. Trading technology firms such as ‘BidFX’ (the newly created FX technology firm, wholly own by TradingScreen) have also come a long way, in effectively becoming a type of supermarket, from where a client can go to a shelf and pick and choose what type of solution they want, what deal types they want to trade, what brokers, what algos, what compliance features. In a similar way with the parent firm, TradingScreen’s clients also choose which asset classes, which banks / brokers, what type of workflow, what type of risk & or compliance they want, and what type of TCA (Transaction Costs Analysis).
The important thing to realise though is that ‘screen’ trading is not the final step in this trading technology ‘evolution’. Indeed our leveraged clients clearly find that a combination of screen & API is becoming progressively more ‘de rigeur’. To that extent I thought it somewhat useful to remind our community that API is an area that BidFX is well versed in, & you’d be surprised to know to what extent & the variety of options that are available, (summarised in the graphic above), so let us know.. email@example.com. In our eyes ‘curiosity never killed the cat’, they have too many lives, so don’t be shy!
I am pleased to announce that BidFX have completed the migration of all liquidity provider (LP) FIX sessions to our new, high-tech FIX session management platform. Our teams have been working really hard on this initiative and we are really proud of their achievement in reaching this critical milestone.
The new platform is really special. It provides a step change in our capability to adapt to the connectivity needs of sell-side institutions. Naturally, it supports all versions of the FIX protocol, and therefore can service LP needs well into the future. It is fast and nimble too, thus reducing the latency of FX streaming rates. It has a small hardware footprint to minimise operating costs. And it provides improved analytics and monitoring, so we can better react to evolving issues before they impact clients.
That’s not all. What is truly special about the new platform is that developers are not required to write customised software for non-standard FIX specifications. Most LPs tailor their FIX specifications to best fit their integration needs. As a liquidity aggregator, adapting hundreds of lines to custom specifications used to be a real challenge and a drain on development resources. So, occasionally, we would encourage LPs to code to our specification to expedite integration. Fortunately, those days are done. With the new platform, bespoke sessions can be created and/or adapted in hours by one of our FIX integration specialists. Send them a FIX specification and often they will be ready to certify trading workflow the next day.
At BidFX we aim to put clients first. This initiative takes us closer to our goal. And don’t worry, our developers have not coded themselves out of a job. They’re just freed up to build the new functionalities that our clients require.
Growth is 40% YoY over May 2016
There’s been a lot of hard work across the BidFX team recently and some tangible gains in market share in the busy eFX market. So what drives this impressive growth in revenue and institutional clients in this changing FX Market?
1) Breadth of FX product
Streaming Spot, Forwards (inc broken dated forwards), NDF and Metals.
Swaps/NDS available via RFS. As our technology team continue to innovate with our Liquidity Providing partners, this month has seen the release of our first streamed swaps over BidFX. BidFX is committed to produce products that create solutions for clients.
2) Multiple Client Interfaces
With a Development team based onsite and in close face-to-face liaison with clients' technology teams we continue to offer true partnerships with our clients in developing customised workflow solutions.
3) FX Transaction Cost Analysis
Pre-trade, In-Trade and Post-Trade with spread and slippage analysis.
4) Algo Hub
Use the Liquidity Providers Algo’s or build your own strategies.
If you are reading this and are interested in looking at BidFX, or comparing it to your current solution, please feel free to contact me directly or email our sales team on the details below.