Awards: XTX Markets

XTX Markets – Best FX Liquidity Provider, Best Non-bank Market Maker

Alex Gerko – e-FX Achievement Award

Alex Gerko, who was head of foreign exchange trading at quantitative hedge fund GSA Capital from 2009, spent five years building up the currency trading business before spinning the operation out of GSA to set up XTX Markets in 2015.

Since then, Gerko hired ex-Deutsche Bank FX heavyweight Zar Amrolia as co-chief executive of XTX, added a raft of senior hires, including Jeremy Smart and Matt Clarke, and within the space of three years they pushed the non-bank market-maker into the top echelons of FX liquidity providers (LPs).

Gerko has been awarded the FX Week e-FX Achievement Award this year to recognise his personal contribution to the significant market structure changes to which XTX Markets has contributed over the past three years.

XTX Markets has also been voted the winner of the Best FX Liquidity Provider and Best Non-bank Market Maker categories at the 2018 FX Week e-FX Awards.

“We are very public and vocal about trying to do the right thing for the market, and not just talking the talk but also walking the walk,” says Smart, global head of distribution at XTX Markets.

We have led the industry with market structure changes such as launching Zero Hold Time (ZHT) and XTX-ray to be able to prove to clients that we actually deliver on what we promise

Jeremy Smart, XTX Markets

In the past 12 months, XTX has doubled its client volumes, diversified its counterparty base, and acquired a full-scope licence from the Financial Conduct Authority as it moves to build a full-product FX offering, including Mifid II products.

“We have led the industry with market structure changes such as launching Zero Hold Time (ZHT) and XTX-ray to be able to prove to clients that we actually deliver on what we promise, and clients have voted with their feet,” Smart says.

“There are other dealers who are now starting to trade with zero hold times, and we welcome those developments as clients will ultimately benefit when there is a transparent and level playing field for all LPs,” he adds.

The ZHT initiative has seen the LP promise that it will not apply discretionary hold times in the last look window. This is not an empty promise, says Smart – the condition is written into the contractual agreements between the LP and its clients, and is freely available in its disclosures on its website.

“‘Cost of rejects’ as a term and concept didn’t really exist before we launched XTX-ray, and started to talk about the importance of understanding market impact and the costs associated with it,” says Matt Clarke, head of Emea distribution at XTX Markets.

“In just a relatively short time, cost of rejects has become part of industry parlance and it’s included in the analytics offerings of a number of platforms as well,” Clarke adds. 

Sea-change in LPs

Since 2014, there has been a sea change in the liquidity provider space. Previously the domain of global banks, the top 20 largest LPs in spot FX now have four non-bank firms among their ranks. New players are also entering the space, as banks retreat from chasing volumes.

The type of clients whom XTX reaches has also changed. While non-banks have been restricted in their ability to trade with client segments such as asset managers and corporates, slow but steady shifts in the credit-intermediation space is increasing the reach of non-bank (NB) LPs.

At the moment, prime brokers control trading arrangements for NBLPs, but as trading revenues at big banks shrink, FXPBs are becoming increasingly open to being flexible with access. Several new technology-led initiatives in the credit space are also starting to emerge.

“Credit intermediation is one area where we see a huge change coming. The unbundling of credit and liquidity is no longer a matter of whether it may happen, but when,” says Smart. “I think we will get to a point where credit is auctioned as a tradable commodity and when that happens we will see a sea change in terms of access.”

New offerings

XTX is now looking to develop its presence even further in the asset management and hedge fund space, and it is preparing to launch several new products to help with the effort. It is also getting ready to provide liquidity in Mifid II-regulated products such as FX forwards.

“We have just launched non-deliverable forwards and we expect this to be a great story for us,” says Clarke. “We are now at the point where we have a full product set to satisfy all client requirements.”

But XTX has no intention of directly competing with banks. Rather than having thousands of counterparties, the trading firm intends to sign up the top 200 FX clients in the world.

And is XTX worried about the new breed of competitors coming into the market? Not so much, says Smart.

“We welcome competition, but we would like to see new entrants follow our example in putting out disclosures around their trading practices, as well as more evidence that these providers really do what they say they do,” he adds.

VIEW THE LIST OF WINNERS