
Streaming liquidity provider of the year: XTX Markets
Risk Awards 2019: Non-bank market-maker doubles direct relationship presence in forex

In 2017, XTX Markets made a bold prediction. Having doubled the number of clients it directly streams foreign exchange prices to – from 40 to 80 – senior figures at the firm forecast another doubling in 2018. What may have been little more that hot air, was, in fact, grounded in reality.
“We have more than doubled the client list this year,” says Matt Clarke, head of distribution for Europe, the Middle East and Africa at XTX Markets, which now boasts 180 clients that the firm streams forex prices to directly.
The trick was to diversify the client base beyond the large retail clients and regional banks, which have historically been at the core of XTX’s strategy.
“We always had a retail and regional bank client base, but we’ve started to add macro hedge funds and even a few asset managers, which is difficult because it’s not a cleared product and you can’t necessarily provide liquidity to them through FX prime brokers,” says Clarke.
The result has been a 65% jump in the firm’s bilateral forex volumes and growth that easily outpaces the 50% volume increase for 2017. XTX has an average daily volume of $150 billion across the asset classes it covers, including forex, equities and US Treasuries, but does not break out that volume for forex specifically.
XTX’s clients appear happy with the service they are getting from the non-bank market-maker.
Invast Global, a Sydney-based forex broker, provides its clients with aggregated feeds comprising streamed pricing from more than 15 bank and four non-bank entities. It ranks XTX top of the list.
“XTX is undoubtedly our best-performing market-maker across a majority of the parameters we monitor,” says Gavin White, chief executive at Invast. “It continues to win more than 30% of our flow, and I believe one of the main reasons is that it puts a lot of effort into understanding our needs and those of our clients – and it customises their pricing accordingly.”
The unofficial benchmark for market-maker performance across the forex industry, the Euromoney survey, also makes good reading for XTX. The firm now sits third, up from twelfth place in 2017, with a reported 7.36% market share, behind UBS and JP Morgan.
This has been helped by the firm’s ‘zero-hold time’ initiative, launched in 2017. XTX does not have discretionary hold times for orders during the last-look window when trading on a disclosed basis with counterparties.
“It’s absolutely unquestionable that moving to zero-hold time has helped our business, grown our business, and meant clients trade more with us,” says Clarke.
“In broad brushstrokes, where we rank in the Euromoney survey is pretty consistent with our view of our place in the world. We try to onboard the right clients we think we can have a meaningful relationship with, and when you’ve got that, you want to be in the top three for your clients,” he adds.
Having expanded its client base, XTX has seen demand for an increased product set. The firm is set to launch direct streaming in non-deliverable forwards (NDFs) either by the end of the year or in the first quarter of 2019. The firm aims to have a fully fledged forex offering, allowing it to compete with bank providers across the entire product spectrum.
“The operational challenge for the NDF market has always been you need a central limit order book to price off,” says Clarke. “So for as long as voice brokers have controlled that market, people like us really haven’t been able to enter it, because we can’t price in an automated way and we haven’t been able to hedge risk.”
Change is afoot, however. Electronic platform EBS, now owned by CME Group, has seen its NDF volume jump by 53% year-to-date, assisted by growth in the Asian NDF market. The next kicker will be when Latin American (LatAm) currencies trade more electronically, says Clarke.
“The interbank market in Asian NDFs is rapidly becoming electronic, while LatAm is less so, but that’s where we see good potential for growth. It’s a very natural evolution, there’s no way to stop it,” says Clarke, who anticipates around 50% of XTX clients will have interest in taking direct streams for NDFs.
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