LPs, PBs, WTF? Liquidity aggregation explained

Ever wondered how a pure A-Book broker prices spot FX for you? In this webinar we explain the terminology (Liquidity Providers, Takers, Prime Brokers, etc.) and how OTC and on-Exchange differ. Last, but not least, we explain how flash crashes come about on the basis of an example affecting our brokerage.
Darwinex. The Trader Exchange. Visit us at www.darwinex.com/?...
Topics: #marketliquidity #forex #flashcrashes

[@Jasperforex]

Fantastic content - only wish more brokers would be so transparent.

[@Darwinexchange]

Thank you Jean-Francois! We're happy to hear you've found it useful.

[@rizwan101]

Finally a video in English!!

[@Darwinexchange]

Hi Rizwan - every video we do is in English (then we add Spanish, French & Chinese), but there's a ton of videos in English...

[@0dq0]

I don't think that limiting the order size is a way to go. You mentioned that the market depth was to blame at that particular point in time. So I guess my solution would be close your feed to customers 30 seconds earlier and a second could be that when a customer sends a big order that cannot be fullfilled at a market price there should be a limit of how much slippage you can do. So probably his order should have been closed partially. OR if you see that by the end of the day the depth is close to nothing you can widen spread accordingly as if there were no volumes at all. Otherwise showing a narrow spread that has no volume behind it can be confusing.

[@Darwinexchange]

HI there - very good point, and that (closing a bit earlier) is indeed something we're pondering. One quick note is that we're 100% a price taker. By regulation we're not allowed to take any risk (e.g. we cannot manipulate the spread in any way). Either we stream prices / take volume, or we don't stream prices / take volume. Anything else is outside of our Matched Principal Broker license. Thanks a lot for the engagement!

[@johnnyhotwiel5409]

☕👂📝👍

[@paulc6100]

One thing I do not understand, why are you using saxo at all why not just using LMAX and provide whatever liquidity is available there irrespective if its large enough or not. I`ve once had a broker that was willing to send his clients a list with the counter party that took client orders, I suppose that at request Darwinex does that also, even historically, everything is transparent, right? That because maybe someday someone would like to check if he was nuts when he observed to many times that the price went just 1/10 of a pip above his stop or something. What if a clients request that all his trades should be executed only trough LMAX (or maybe some prefer saxo its not important) is it possible from a technical point of view?

[@Darwinexchange]

Dear Paul, thanks for the question. It is possible to use LMAX only, as a matter of fact this is something we can arrange on request. There's 3 reasons we use another LP. The first is technical redundancy - we don't want to interrupt streaming prices if for whatever reason LMAX goes down. The second is spreads. On occasions, last look liquidity (what everyone offers, except LMAX) offers better spreads - and we want customers to be able to enjoy that whenever this is te case - otherwise we'd be competing in inferiority of conditions with other brokers. The third is price stability. Much as we love LMAX (and we do), the LMAX stream is "spikier" than the other, and for a couple of hours in the early Asian session, spreads tend to be VERY wide. On the "sending clients a list of counterparties", we used to have an "execution quality" public section doing just that, before "re-loading" our interface, and we're rolling out another where every user will see all the details around slippage etc. in his execution. So hopefully this should take care of issues. Hope that answers the question?

[@petrv76]

I love "WTF" in the title... ROFL

[@Darwinexchange]

It's just that it angers me to hear so many people talking about stuff they don't understand, pretending to teach lessons...

[@woopygoman]

Hey Juan, I don't doubt Darwinex's legitimacy. Not even a bit. But I have a bit of a tricky question for you. Don't you think that pro traders would take you more seriously as a broker if you offered futures and stock trading? Especially popular futures contracts offered by the CME because they have a ton of volume/liquidity. I've been wanting to trade them for a really long time for various reasons but primarily because of counter-party risk and conflict of interest. So is there are reason you don't offer futures yet (mainly CME)? And is it possible to trade futures in MT4? I have yet to find an MT4 futures broker in North America, which is kind of strange. And lastly do you think it will ever be possible to trade futures with the same small margin requirements as retail fx? Thank You

[@Darwinexchange]

Hi woopygoman - I do think that pro traders will take us more seriously when we add futures. As a matter of fact, we've been hiring personnel and integrating the CQG futures platform for a bit of time now, with a view towards offering futures trading. MT4 is structurally unsuited to trading anything related to market depth, as it is at heart a dealing (not brokerage) platform. In the future, we'll have to make a call on whether to add MT5 (which can do futures out of the box), but we're reluctant to do anything MT precisely because of the stigma it imposes on us. So - expect futures from us. Second: we already do cash stocks - we have been doing this (in beta, offline mode) on the Realtick platform for quite some time, and decided that cash stocks are too complex to manage in the back-end for us to extend the DARWIN model to it. Instead, we shortly begin adding the top 200-250 stocks globally to our offering in CFD format on MT4, with the option of listing DARWINs on single stock CFDs. Last, but not least, margin requirements and their inverse - contract sizes. Imho futures exchanges have missed a boat by continuing to list institutional size futures contracts at a time where technology allows for further granularity. If they stick to those guns, they make themselves vulnerable to retail providers offering "on - exchange" like trading (CCP, order-book, etc.) for CFD settled "futures" and - in time - grow to disrupt them. So, I can't answer for them... but I don't rule out becoming a "Betfair" for CFDs in the future. Actually, I very much fancy it... Last - but not least - the US is one of our biggest sources of traffic, so as soon as we have the bandwidth to explore, we'll look into regulatory options to start on-boarding US customers.

[@woopygoman]

Exciting stuff! Especially the CQG futures platform integration and US on-boarding. Can't wait to hear about those announcements.

[@AlexanderTatsumaki]

good talk, i'd love to discuss some issues. maybe i should send an email?

[@Darwinexchange]

Hi - feel free to reach out to [e-mail] and we'll be delighted to discuss. Thanks!