FNG Exclusive Interview… Tom Higgins, CEO of Gold-i talks to FNG about the necessity of having multiple liquidity sources and provides guidance on what to look for in a liquidity management platform.
FNG: Hi Tom. What is the advantage of having multiple Liquidity Providers?
Tom: There are a number of advantages. Firstly, the ability to aggregate on best price is a significant benefit. You will get better execution prices if you have multiple Liquidity Providers because they are effectively competing with each other for your business.
Secondly, you have a failover if one of your Liquidity Providers has an issue (and all LPs have downtime at some point). Reliance on a single Liquidity Provider could leave you without any pricing if that Liquidity Provider is down for any reason.
Thirdly, having multiple Liquidity Providers deepens your order book. If a client is trading high volumes, you might choose to fill everything at the top of book across three Liquidity Providers rather than going down the book across a single source.
In summary, having multiple Liquidity Providers gives you access to better prices and increased reliability. It also puts you in a strong position to negotiate with Liquidity Providers if you can show that you are getting better prices elsewhere.
FNG: How is Gold-i’s MatrixNET designed to accommodate aggregation?
Tom: MatrixNET is a multi-asset liquidity management platform, with many automated features, strong controls and the ability to manage liquidity with great granularity. It offers brokers a multitude of routing and aggregation methods and the ability to tailor execution models to suit the unique preferences of different client types.
For example, most clients choose for an order to be automatically split into a number of parts and distributed around multiple Liquidity Providers to get the best VWAP price (Volume Weighted Average Price). However, they have the option for the entire order to be executed in one place, through a single Liquidity Provider which has the most competitive VWAP price.
We have put a number of configurable controls in place to provide protection. Also, if a Liquidity Provider is showing the best price but can’t actually fill you – perhaps because they have technical issues – then you’ll be automatically routed to another Liquidity Provider in your aggregated book.
Brokers to get a full report on what is happening and why, without having to continually do manual checks.
FNG: How does MatrixNET differ from other liquidity management platforms?
Tom: It all comes down to features. Innovative features and capabilities we have been working on include smart retry logic, synthetic instruments, trading control API, point-based speedbumps and WebSocket API. We have invested a lot of time advancing our re-try mechanisms, including the ability to exclude Liquidity Providers that have already rejected you.
Another feature we have introduced is what we call our ‘Sin Bin’ system, where we yellow card a Liquidity Provider if they reject orders. For the next hour (or a time period of the user’s choice) we don’t route orders to them. Once re-instated, if they reject again, they are red carded and are permanently removed. This is flagged to the broker and their risk manager can assess the situation and decide if or when to add them back in.
FNG: What are the most important factors to look for when selecting a liquidity management platform?
Tom: The obvious questions to ask are which asset classes and instruments are covered, speed of price updates, trade execution times, costs and commercial structure (i.e. fixed monthly price or lower monthly fee and transaction fees), and whether institutional grade Disaster Recovery is built into the product.
When selecting a liquidity management platform, people don’t often know about specific features to ask for that can make a huge difference in terms of saving time and money or providing additional protection. Features such as speedbumps and retry logic really are must have features.
It is worth noting that speed is really key and can vary significantly amongst different platforms. Due to the large number of price updates per second in the crypto space, we’ve ensured that MatrixNET can cope with 50,000 price updates per second.
FNG: How do brokers select which LPs should be in their aggregated book?
Tom: We are often asked this. We have a lot of experience from working with many Liquidity Providers, so if we have a clear understanding of a broker’s trading strategy, we can recommend Liquidity Providers that are a good match – i.e. with the right leverage, the right instruments, ticket size etc.
MatrixNET has over 80 pre-integrated Liquidity Providers and 35 crypto exchanges. If clients come to us and want to add a Liquidity Provider that we don’t currently have, we’re always happy to do an integration – and we don’t charge to integrate new Liquidity Provider.
FNG: How key is MatrixNET in Gold-i’s product portfolio?
Tom: MatrixNET is our flagship product and is at the centre of our product offering. Our other products are built to seamlessly add onto MatrixNET and create a full solution for brokers, funds and institutions. Sales have increased significantly over the last two years and we continue to invest in it and add new functionality. Our extensive MetaTrader plugins and risk management tools remain important to us and are essential for helping brokers to operate effectively, minimise risk and maximise profit.
