24X’s Dmitri Galinov explains optimal liquidity in 24/7 trading at TradeTech FX

North America’s biggest FX gathering of the year took place on February 22-24 at The Diplomat Beach Resort in Florida, USA.

More than 600 executives – including key regulators, buy-side, sell-side, and technology vendors – attended the conference this year for the panel discussions, hands-on workshops, and to network.

FinanceFeeds was there covering the event. Editor-in-Chief Nikolai Isayev had the opportunity for a quick chat with Dmitri Galinov, Founder and CEO of 24 Exchange, the

OTC ECN addressing market challenges such as fragmented pools of liquidity and increasingly costly access fees and data.

Dmitri Galinov, who was previously founder and CEO of NY-based FastMatch, established 24 Exchange in 2019 with the mission of operating a multi-asset venue 24/7.

The first billion is the hardest

24X finally crossed the $1 billion of FX NDFs average daily volume in January 2023, only to process $1.49 billion AVD the following month – up by nearly 50% MoM- which once again confirms the popular saying “the first million/billion is the hardest”.

Galinov agreed. “It is true that the first billion is the hardest, especially in a market like FX NDFs which are emerging market currencies, but we’re growing very very fast […] Once you pass the first billion, then it starts growing on its own, and much quicker. Very exciting to see”

The current macro environment, with geopolitical issues, rising interest rates and volatility, are the key drivers for the increased demand for FX NDFs, he said, while including an additional and unique factor: availability. Electronic FX NDF trading was not available to market participants as it is now, with 24X. That is bringing several market participants to the fore, such as non bank market makers.

Dmitri Galinov sees FX NDF trading continuing to grow in popularity down the road. “Fortunately for us, market operators there are always things happening all the time. We benefit from increased volumes and so forth. I think NDFs will be popular especially in an electronic way, There is a big migration trading NDFs via voice and chat channels towards the electronic platform. It is here to stay.”

Hot to provide optimal liquidity in FX NDFs

24X’s chief executive then explained what makes the company unique for FX NDF trading. “NDFs are pretty regulated instruments”, he said, as he told FinanceFeeds that a New York trader cannot trade directly with a London trader, or with a Tokyo trader, etc. That’s where 24X single anonymous pool of liquidity comes in. 

The single anonymous pool, which is a decisive feature of 24 Exchange, was built in partnership with Standard Chartered and allows market participants to trade regardless of their jurisdiction using StanChart as their counterparty, thus creating a very liquid pool that never existed before. The bank also takes care of all the proper reporting in each country.

In addition to the anonymous pool, 24X has sophisticated analytical software that allows them to fine tune each client’s liquidity to their needs. “We know what kind of sizes they trade, the timeframes they use to execute. Those are the two steps that allow us to provide optimal liquidity to our client.”

Crypto ecosystem didn’t follow basic regulatory rules

Headquartered in Hamilton, Bermuda, 24X also offers exchange services for Crypto NDFs and Crypto Spot, an asset class that is enduring the aftermath of the FTX collapse. “What separates us from others is our regulatory status. Whether clients want FX or Crypto, they know we have very high standards of regulation. Very few people are regulated to such degree”.

24X is operated by 24 Exchange Bermuda Limited and 24 Exchange Broker Limited which are regulated by the Bermuda Monetary Authority (BMA) for the purposes of conducting Digital Asset Business, pursuant to the Digital Asset Business Act.

The FTX debacle created a lot of questions in the industry, Galinov said. “Many firms did not take proactive approaches like KYC policies that are required in other asset classes. That’s one thing that is hampering their effort. Not only KYC/AML. Also cybersecurity – regulators demand security audits – and understanding vendors. There are multiple steps that we have to follow, but many exchanges don’t follow them”, which leads to hacking, mismanagement, and not even having boards of directors.

Future is 24/7 trading, T+0 settlement, on the blockchain 

The “24” on 24 Exchange stands for 24/7 trading. It is this vision that drives Dmitri Galinov’s work to help build the trading industry of the future, but it is a “massive change” that requires time.

“You increase time available for the market five-fold. It includes weekends and holidays. Not only is a massive change for the actual exchange but also for surrounding organizations”, he said, reminding that regulators would also have to be on the clock 24/7.

Speaking of regulators, the Securities and Exchange Commission has recently proposed a move from a T+2 settlement cycle to T+1, in line with Canada’s goal. Dmitri Galinov believes T+0 will be next, and on the blockchain. That topic, he says, is complementary to 24/7 trading as both are risk reducing solutions.

24X to focus on FX Swaps and Equities in 2023

24 Exchange’s offering includes FX NDFs, FX Spot, FX Swaps, Market Access, as well as Crypto Spot, and Crypto NDFs. All anonymous. The next step is to obtain SEC approval for a stock exchange in the United States.

That one is a bold step because it plans to be a stock exchange like no one other, offering 24/7 trading. Dmitri Galinov’s team applied once with the expectation of being approved in 2022, but it was not possible to go through all details with the regulator in time, which led them to withdraw the application.

24X has to figure out, among other issues, how to make the SIP work 24/7, timings, and costs. The plan is to work with the SEC to clear all the issues and resubmit, start the timer again, with the hope that it will be a much quicker process. “We still expect the license to be this year”, as he added he is very optimistic about securing a stock exchange license.

For 2023, the company is positioning itself as a key venue for FX swaps as it keeps attracting banks to its anonymous pool of liquidity. Equities is also a key focus point for this year.