Exclusive: As OTC industry embraces multi-product solutions, live commodities price feed and matching engine hits the market

During the past few months, there has been a massive rush toward genuine multi-product trading environments by retail electronic trading firms, platform providers and integration specialists alike.

Examples of this have manifested themselves recently in the connectivity to exchanges alongside OTC products on one platform.

Direct FX, which entered into a partnership with DriveWealth which has a relationship with ICBC which is now a NYSE member firm. Chinese investors can that way invest in US firms that include Amazon, Apple, Google, alongside Chinese stocks like Baidu and Alibaba, and all traders globally can access listed products on CME.

Meeting with Business Development Director Tim Brankin recently in Shanghai, the need to combine listed and OTC products on retail platforms such as MetaTrader was a poignant subject.

“My main focus is working with the institutional clients here in China to set up the connectivity and access to the US futures and equity markets for their money managers and their clients, therefore now our chinese partners and clients have a truly diversified portfolio for the first time by being able to invest in US commodities, equities alongside the currency markets, so our aim is to become a comprehensive financial services provider similar to the companies I worked at in the past like TD Ameritrade and E*TRADE which have turned into global powerhouses for self-directed retail futures investors” Mr. Brankin explained to FinanceFeeds.

We can also connect to regional exchanges around the world. We have a partnership with CQG which is a company that built several connections and the ‘plumbing’ to all the exchanges around the world. We have a partnership with oneZero as we needed to be able to develop bridging technology to take what CQG had built and integrate that for exchange trading on MT4 whilst allowing FX to be OTC” – Tim Brankin, Business Development Director, Direct FX

Yesterday, MetaQuotes, which produces the ubiquitous MetaTrader platform, began to expand its direction toward listed product connectivity, as Just2Trade released an integrated solution based on the MetaTrader 5, bringing within reach of retail customers some of the largest major exchanges.

In total, the company provides access to 9 000 financial instruments: 6 000+ stocks and ETFs on the US stock market, 700+ stocks of Russian companies, RTS, MICEX, stocks and currency futures, as well as direct access to GLOBEX, EUREX, SGX and other exchanges. Besides, stocks and futures contracts on all major European and Asian exchanges are available on request.

The multi-product direction is certainly a move toward empowering the exchanges in their quest for more retail business, and is likely to be a more globalized, less costly alternative to using Chicago-based retail listed derivatives platforms such as Trading Technologies or Tradovate because the client basis of the retail brokerages that can now place traders on exchange are within the $3500 to $6600 deposit range (the average for OTC retail clients) rather than the $50,000 of exchange listed futures traders.

On April 1 this year, this direction is being developed even further with the launch of a live pricing engine for commodities that has been developed for use in retail trading by FX industry specialist Ludovic Vuillier in France.

Mr. Vuillier, who is CEO of Live Rates Feeds, has been in the electronic trading industry since 2003, and has held various positions, as an introducing broker, an investment manager, a sales trainer and a consultant that establishes sales teams and generates leads for client acquisition.

Launching the product today, Mr. Vuillier explained to FinanceFeeds “As you know, retail platforms let you trade currencies, stocks, commodities, and indices, regardless of whether they are listed or over the counter.”

“Two things are needed for something to be trade-able, a price feed that can connect to the platforms and a price” he said referring to connectivity to a prime brokerage via a liquidity management system.

“We have built an index for something that is currently not being traded online, plus we have built a live feed but we also went one step beyond. Since b book is a risk which we are happy to help brokers mitigate. We have built a matching mechanism so that when a broker connects our price feed to their platform, it connects with all other brokers connected to us and matches the trades” – Ludovic Vuillier, CEO, Live Rates Feeds

When asked by FinanceFeeds how this solution and trading environment differs from institutional pricing engines and matching solutions such as ICAP’s EBS BrokerTec or Thomson Reuters FXall, Mr. Vuillier explained “This means that each broker can choose to take the risk if they want to, but assuming they don’t, we have the matching mechanism in place.”

“We’re not competing with existing institutional matching engines, instead this is something we’ve built to connect to their platform for our price feed only, at least for now. I prefer to have a thousand partners than a thousand competitors.”

“Let me take a step back and bring up something else, then I will put it all together” said Mr. Vuillier.

“Right now, this new product, which is called Live Rates Feeds, is something that will expand the scope of current electronic trading environments, especially at this time during which OTC spot transactions are becoming the bete noire of regulators” he said.

“As you know, the FX industry is always looking for the next thing since clients at some point don’t want to invest in the same instruments, which is how offshoots such as exchange listed binary options started” said Mr. Vuillier.

Continuing on that note, he explained “That’s also why some of those companies opened lottery platforms, which hasn’t really taken off, and the next thing is that many companies have developed platforms where people can trade diamonds.”

“The problem with many current platforms which facilitate this is that they are trading actual diamonds on a physical delivery basis, or speculating on the price of actual diamonds, so now people need to learn about all the different types of diamonds, and their specifications.”

“For this reason, we built an index of diamonds which consists of several indices within, and around this index we built a price feed which is based on speculation on the price (just as with gold) and this price feed can connect to ALL platforms, whether standard off the shelf FX platforms such as MetaTrader, or bespoke proprietary plarforms used by large firms such as Interactive Brokers, for example, instead of moving clients to a new platform” Ludovic Vuillier

Looking at how this is capitalized and how platforms can be structured commercially, Mr. Vuillier explained “Some integration firms allow brokers to pick and choose the liquidity providers and manage the different ways they connect to the broker in terms of percentage and so forth.”

“We are supplying a price feed which does not exist elsewhere and to help our clients mitigate risks we built a matching mechanism behind ” he said.

Whilst currently pricing diamonds, Mr. Vuillier explained that this feed can be used to price any commodity at all via all retail platforms. FinanceFeeds asked where the price feed originates from and who the prime brokerage is behind it, to which Mr. Vuillier replied “the price feed is an index of the current diamond prices.”

Taking diamonds as an example, Mr. Vuillier explained how this will display on trading platforms. “Trader will not need to change platforms. Imagine if on your screen you see right now the different commodities and currencies, so now you will have an additional price called “Diamond index”.

“This system can be connected to any platform, and in terms of which brokers will want to add it, I would suggest that any broker who wants to offer his clients something new will take it up. The reason we began with diamonds and are using that as an example is because I’ve dealt with diamonds before (physical diamonds) and I was always intrigued by the fact that we trade everything online but that diamond trading is still old school” said Mr Vuillier.

“If someone tomorrow comes to me and wants to do something other than diamonds we already have the mechanism in place so no problem
exactly what you wrote above about the multi-asset solutions needed” he said.

“The Singapore diamond exchange has made their trading electronic, but only for actual diamonds for physical delivery and there is no speculating on the price.”

With regard to whether this solution could be white labeled, Mr. Vuillier said “Since we will already have the contacts in place with the brokers, I think they would prefer a partnership, but again, we’re flexible.”

In respect of cost per million, Mr Vuillier explained “Each broker will pay the agreed upon price since in any case, in any trade you enter the trade and exit the trade, each one pays the price agreed, it affects the price their clients see and they have the ability to add to the spread for themselves of course.”

This solution goes live on April 1, and Mr. Vuillier signed off by explaining that he considers this to be a further step toward democratizing a fully comprehensive multi product solution for retail traders.