Matthew Carstens talks to FinanceFeeds about eqlx, the new broker which aims to create greater transparency
“Customers care about their trade and the execution of it first and foremost. That has to do with rejection rates, spreads, and commissions. Just because you deal with a PB doesn’t mean your rejection rates are lower than if you deal through a secondary PB or direct with a market maker” – Matthew Carstens, CEO, eqlx
Last week, FX industry innovator Matthew Carstens unveiled a new brokerage called eqlx which aims to provide greater transparency to its clients, including a detailed breakdown of revenue and expenses which have been incurred by users.
Today, FinanceFeeds spoke to Mr. Carstens in order to take a close look at this new model.
The concept of providing an equal trading environment to retail customers is of great interest. What facets were considered when developing eqlx that were in your opinion missing from today’s trading environment?
eqlx was born out of frustration. Frustration with the status quo. Since the inception of the industry there has always been a divide between what is in best interest of the client and what is in the best interest of the broker. We wanted to create something that would change that forever. Regulation attempts to protect against this, but the reality is that there is always that suspicion.
Traders care about execution, they care about safety, but they don’t really know what happens on the brokerage side. We wanted to kill the status quo that is today’s Broker/Dealer. Our model does that. There is complete transparency in whatever you want to know, and in the end, if the brokerage makes money and is profitable- you benefit. We think, this is the brokerage equivalent of utopia.
From a risk management perspective, how can traders gain direct market access to aggregated liquidity without exposing the brokerage or themselves to negative balances?
You cannot. That is the simple transparent answer. We could answer with some marketing hype but this is the reality with DMA.
In order to gain a fully transparent and fully accessible trading system for retail clients, brokerages would need to have a very large capital base in order to gain counterparty credit from prime brokerages and subsequently for the prime brokerage extending the liquidity to be able to justify it to the banks. How does elqx structure itself in this respect?
That is not true. Transparency does not only manifest itself if you are dealing with a prime broker, have a lot of money, prime brokerage relationships, etc, etc. Our brokerage runs very simple. It will change as we grow as a company. Right now we open accounts through a trading name provided by ACM Group. As our Collective grows, and we as a company grow, this will change.
The same thing is said for liquidity. Customers care about their trade and the execution of it first and foremost. That has to do with rejection rates, spreads, commissions, etc. Just because you deal with a PB doesn’t mean your rejection rates are lower than if you deal through a secondary PB or direct with a market maker. Nor does transparency only occur through a PB.
We disclose what we do and how we operate, what our rates are at the core, and what we are being charged, and most importantly, are charging people. This is transparency.
As an FCA regulated subsidiary of ACM Group, which regional client bases are of interest and what is the target audience for eqlx?
Let me first address that eqlx is not a subsidiary of ACM Group, when eqlx opens accounts now it is through a trading name provided by ACM Group and is why we chose them, as an FCA regulated provider, and all of the customer benefits that come with that.
To your question though, we really feel this is a message for the world. Why would anyone not want to trade with a broker that discloses the way things work fully, their margins, the costs to clear, you name it. I mean we are really talking about a company that answers whatever question you have and then if they make money pays you almost like a shareholder!
We want this for the world, but for right now as we are in a startup mode we need to focus, and our focus is on EMEA and Asia Pac.
Do you consider eqlx as a disruptor, and if so, what is the future for market makers and b- book firms that continue to do business by matching prices with a live price feed but executing in-house?
We would rather use the term, innovator. I don’t see the future being defined by if a firm STP’s trades or deals their own internal inventory when it makes sense. That’s just normal and happens in many markets globally that are exchange traded.
Look at the trading of stocks in the US. Most people don’t realize when their stock trade has been dealt out of the B/D internal book or actually routed to an exchange or market maker they have rebate for order flow deals with. So for us it’s not about B Book or A Book.
It’s about transparency and doing what is best for our entire customer base (the Collective) and us at the same time. Sometimes that will be B Book execution, sometimes that will be A Book. We acknowledge that, that’s how this world works. Our difference is that we are transparent about it. We are in this together, eyes wide open.
London is a fintech center and has become the world’s largest institutional and interbank FX capital. How do you anticipate the launch of eqlx to be perceived by the long-standing giants of the Square Mile?
Until we get traction they probably will not care. When we do, we don’t believe they would have the appetite for matching our complete transparency. The only thing that they have now is money for marketing hype and a larger balance sheet. That we think will change, and that is the revolution that we see coming.
Innovation and value proposition is on everyone’s mind these days. What will eqlx do in the next year to demonstrate its unique position?
Deliver on our model, and look to do what is in the best interest of the Collective. That may be new technology deals, new affiliate programs. Not much that we want to disclose now, but we have a few other things that will push this even further. Stay tuned.