Gold-i at iFX EXPO Asia 2023: Tom Higgins explains Crypto Switch 2.0 and warns FX brokers

Rick Steves

Gold-i’s Tom Higgins spoke with FinanceFeeds’ Editor-in-Chief Nikolai Isayev about Crypto Switch 2.0 and the resurgence of FX brokers amid high volatility.

iFX EXPO ASIA 2023 interviews

This years’ iFX EXPO Asia took place at the Centara Grand & Bangkok Convention Centre at CentralWorld.

From 20 to 22 June, the arena hosted 3,000 attendees, exhibitors and sponsors which included successful start-ups, leading international brands, and industry giants.

Gold-i focused on Crypto Switch 2.0 for brokers in Asia

Among the leading FX brands present at iFX EXPO Asia 2023 was Gold-i, a household name within the FX industry, known for its MetaTrader plug-ins, FX and crypto liquidity management solutions, and business intelligence tools.

Gold-i attended the Thailand expo as institutional attention shifts to the Asia Pacific with the expansion of connectivity in key financial hubs, including Hong Kong, Singapore, and Tokyo, to enhance pricing and execution in the region.

The firm’s signature products in APAC are the Gold-i MT4 Bridge & MT5 Gateway, the Matrix liquidity aggregator, and the MT4/5 Multi-Account Manager (MAM), but Gold-i has been increasing focus on its Crypto Switch 2.0 product, especially in Hong Kong, Singapore, Japan and Korea.

On that note, Gold-i has most recently integrated the global credit network Hidden Road to its crypto liquidity aggregation platform in order to offer clients a way to mitigate risk with real-time trade settlement.

With Crypto Switch 2.0, it doesn’t matter if a crypto exchange goes down

To discuss all of the above as well as the current opportunities and challenges within the FX industry, FinanceFeeds Editor-in-Chief Nikolai Isayev spoke with Tom Higgins, Founder & CEO of Gold-i.

“We launched the product [Crypto Switch 2.0] a few years ago, which was enhanced through time. The institutional world is more about separation of responsibilities and Crypto Switch fits really well into that. What we don’t do is the prime broking and settlement part. Hidden Road are extremely strong in that area. They don’t provide any liquidity aggregation or Smart Order Routing (SOR), instead, they’re post-trade and settlement, which is a really good fit for clients that want the best price and access to clients, but also a market with prime broking for credit intermediation and leverage”, Gold-i’s Higgins said about the partnership with Hidden Road.

In regard to risk mitigation, Tom Higgins explained that people have grown wary of putting all eggs in one basket, especially in crypto, where frequently we don’t even know where the money is and how secure it is. “Having a dedicated provider of wallets looking after your money just makes sense” and Hidden Road has a well-proven tested, and auditable wallet infrastructure of hot and cold, he stated. “If an exchange goes down or has a problem (regulatory issues, etc), then by using aggregated liquidity, it doesn’t really matter.”

Three crypto counterparty models: Zero Hash, FXCH, Hidden Road

Crypto Switch 2.0, Gold-i offers 10 to 20 venues to execute against and it can be done in three different ways: 1) daily settlement, 2) positions against a clearing house, 3) and a Prime Broker model of sorts. The three achieve the same thing which is having multiple trading venues and ending up with positions against one place, he noted. Gold-i’s Higgins explained each of the models available on Crypto Switch 2.0:

1 – The net settlement model, in partnership with Zero Hash as the counterparty, allows the client to end up with a net position on a daily basis;
2 –The clearing house model, in partnership with FXCH as the counterparty acting as the clearing house, includes access to credit similarly to a prime broking model;
3 – The ‘Prime Broker’ model, in partnership with Hidden Road as the counterparty, allows the client to contract, deposit funds, and trade against them. Hidden Road has sub accounts with all exchanges and market makers and manages the netting of all of those trades together. Hidden Road offers leverage, which allows clients to multiply their deposits with crypto exchanges.

Crypto Switch allows clients to mix OTC market makers with crypto exchanges together and create an order book across all those different products, Higgins concluded.

Asked about the momentum within the crypto space and the debate over speculation vs utility, Gold-i’s chief executive mentioned the Gartner hype cycle to argue that crypto and blockchain will follow the same path as laser technology and many others before did: First, the peak of inflated expectations, then the trough of disillusionment, followed by the slope of enlightenment to finally reach the plateau of productivity.

FX is back, but brokers should watch every penny

On last year’s FinanceFeeds Podcast episode with Gold-i, Tom Higgins said nowadays “you don’t see new brokers being created all the time” unlike 10, 20 years ago. The current macro picture of higher rates and volatility, however, brought some change to the FX picture, with brokers more interested in Gold-i’s FX & CFD products.

“In the last 12 months, with increased volatility, we’ve seen a real increase in FX brokers and a renewed interest in our Matrix product, for example. This year, a lot of development efforts went into building hybrid functionality” for brokers doing both a-book and b-book as nearly all brokers are now hybrid, with the majority of their trading on b-book. “They have to protect themselves against all things traders will do against them – a particular one is latency arbitrage and one of our products identifies people doing that and stops them. They can carry on trading but can’t benefit from it, which is market abuse.”

While Gold-i continues to develop Crypto Switch 2.0, FX has seen a significant resurgence in the last 12 months, “which is really nice”, he said, as having a business with two revenue streams (Crypto and FX) is “great”.

On the other hand, inflation and higher interest rates are putting pressure on costs, with vendors sometimes even doubling prices. The FX industry is also currently crowded after years of high profits. These two variables are putting increased pressure on FX brokers who are being advised to “watch the pennies”.

“Every industry goes through this and eventually ends up with a lot of competition and requires you to be conscious of costs. It’s unusual and unnatural for an industry to have excessive profits for a long period of time. It doesn’t work like that”, Tom Higgins said to conclude the interview with FinanceFeeds at iFX EXPO Asia 2023.

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