FXSpotStream - Operating a business model that’s simple, clear and compelling

FXSpotStream, a subsidiary of LiquidityMatch, is the bank owned consortium operating as a market utility which was formed in 2011. e-Forex talks to their Co-founder & CEO Alan F. Schwarz, about the reasons for the extraordinary popularity of his service and future plans.

FXSpotStream, a subsidiary of LiquidityMatch, is the bank owned consortium operating as a market utility which was formed in 2011. e-Forex talks to their Co-founder & CEO Alan F. Schwarz, about the reasons for the extraordinary popularity of his service and future plans.

Alan, we last profiled FXSpotStream nearly two years ago. Have things been progressing with the business since then as you anticipated or have you been surprised in any way?

We have been extremely pleased with the progress of the business, which continues to exceed all our expectations. We just closed our best year ever since launching the Service over 7 years ago. In 2018 we experienced tremendous growth on all fronts including hitting 5 monthly ADV records (January, February, June, September and October). Last year FXSpotStream grew at the fastest rate of all eFX cash venues recording an ADV increase of 53% when compared to 2017. The total traded volume supported in 2018 was over USD7.75 trillion - an increase of 2.71 trillion when compared to the prior year. Of all the eFX cash venues that report volume, in November and December of 2018 FXSpotStream ranked 3rd in terms of size by overall volume supported - quite an achievement considering how long the other incumbents have been participants in the market. 

We closely monitor the capacity and performance of our service
We closely monitor the capacity and performance of our service

FXSpotStream recently broke yet another ADV record registering an ADV of USD35.5 billion during last October. How big an increase was this over your previous ADV record and what do your YoY growth figures look like? 

Our ADV record prior to October 2018 was in September of last year at USD31.9 billion. October’s ADV of USD35.8 billion exceeded September’s ADV by 12.44%. In October of last year, we also set an Overall Volume record supporting a total of USD824.6 billion. On January 3rd 2019 we broke yet another daily record supporting USD51.8 billion. Our prior daily volume record was on US Election Day in 2016 when we supported a total of USD49.1 billion. The fact that we set a daily record on a “normal” day versus an expected high volume day related to an election or an event such as Brexit is a testament to the continued growth of the Service and the value our clients and Liquidity Providers find in using FXSpotStream.

Alan F. Schwarz, CEO We just closed our best year ever since launching the Service over 7 years ago.

Alan F. Schwarz, CEO

We just closed our best year ever since launching the Service over 7 years ago.

FXSpotStream is clearly going from strength-to-strength and filling a need in the market. What are the main reasons behind the extraordinary growth in these numbers and why you are winning so much business?

Yes, every year since we launched the Service we have grown our volumes and our clients. The reasons behind the success of the Service are many, but one of the key factors has to do with our business model - a no fee service to clients that receive prices from a superb group of global FX banks that do not pay a per transaction fee to trade with their clients on a fully disclosed, bilateral basis. In addition, both Liquidity Providers and clients can achieve great efficiencies and save a substantial amount of money in facing each other over a common API supporting various FX and Precious Metals products. Just as important is the unmatched 24-hour level of support our global team provides from all our offices in London, Tokyo and New Jersey. Our growth, of course, coincides with a trend we have been seeing for several years in which we see trading migrate to disclosed versus anonymous channels. Given heightened interest from market participants on market impact, keen interest in the nature of liquidity and transaction costs we expect the shift in trading preferences to continue and we look to capitalize on these trends. 

What remains so unique about your offering?

We are the only bank owned consortium that offers clients a no fee service and our banks the ability to trade with their clients using a fixed monthly fee irrespective of the volume transacted. 

Tom San Pietro is CTO
Tom San Pietro is CTO

Why are both counterparties in a win-win relationship when trading via FXSpotStream?

A no cost offering to clients and a flat fee to Liquidity Providers for unlimited volumes transacted all supported over one API and one connection is an extremely compelling and value producing proposition. Clients can trade as they would without doing all the work involved in connecting to multiple bank APIs. Liquidity Providers and clients can trade with each other on a disclosed basis with bespoke liquidity and full transparency. The formula works, and the proof is in the success and growth of the Service. 

Campbell Cleland is Head of Sales for APAC
Campbell Cleland is Head of Sales for APAC

What range of financial instruments can now be traded on your Service and what sort of clients are you supporting?

We offer FX Spot, FX Forwards, FX Swaps, NDF/NDS and Precious Metals Spot and Swaps. We can service any client that has a relationship with one of our 13 Liquidity Providers. Our global client base is quite diverse including banks, hedge funds, margin and retail brokers, systematic trading firms, corporates and asset managers. 

Let’s talk about how you have been growing the business on all fronts. What are the key areas you have been focusing on?

Well, we don’t forget how we got started. So, like we did when we formed the business over 7 years ago we remain focused on our Spot FX API offering which represents the majority of the volume we support today. Of course, expanding the product offering remains a focus and nearly 2 years ago we added NDFs and NDS to complement the already diverse product suite. Most recently in early 2018 we launched our analytics package, FX|Insights, which has been extremely well received by both our Liquidity Providers and clients. Our analytics tool set gives our banks and clients a vast amount of information relating to the activity on the Service from price dissemination, order placement, execution and performance metrics. In addition to expanding the product set, we continue to add functionality to both our API and GUI. 

We have distinguished ourselves as an organization that can work as a team and get things done
We have distinguished ourselves as an organization that can work as a team and get things done

There is now a much greater awareness of the cost of trading FX and the various incremental costs of each step in the process. Platforms like FXSpotStream are helping firms to eliminate many of these but how much work is there still to do here for the industry and what remaining pain-points still need addressing?

The cost of trading remains an issue and it continues to top the list of issues clients and Liquidity Providers are looking to solve. However, there remain many segments of the market that are still not trading in the most cost-efficient manner and that presents a great opportunity for FXSpotStream. Despite the tremendous growth in our business, we like to tell the team internally that “we have not yet gotten started”. I firmly believe that we continue to work hard to build the business for the benefit of our clients and banks. 

Your powerful analytics suite, FX|Insights, delivers real-time data to both clients and LPs and provides valuable insights to help manage trading more effectively. What led FXSpotStream to develop this tool and what benefits does it deliver?

We developed the tool to continue to service our LPs and clients. There has been a need in the market for trade analytics, and to further enhance our offering we launched FX|Insights. FXSpotStream’s analytics suite, FX|Insights, which is free to our clients, delivers real-time data to its clients and Liquidity Providers to meet the business challenges and demands of trading FX and Precious Metals. The continued focus on transparency and interest in managing the entire life cycle of an order have been the key drivers in the development of FXInsights. Our powerful visual analytics tool provides our clients and banks with valuable information to help manage their trading more effectively. Clients and banks can utilize the data to identify and often pre-empt trading issues that may occur. 

Our global client base is quite diverse
Our global client base is quite diverse

What leading global banks currently supply liquidity to your platform and do you expect to add even more to your line up?

We currently have 13 global Liquidity Providers connected in all our sites globally: Bank of America, Bank of Tokyo- Mitsubishi UFJ, BNP Paribas, Citibank, Commerzbank, Credit Suisse, Goldman Sachs, HSBC, JPMorgan, Morgan Stanley, Standard Chartered, State Street and UBS. We constantly evaluate the panel of Liquidity Providers and do not have a finite group of LPs in mind. What is important is to have the right mix of LPs and clients that help grow the Service and the volumes we support. 

Our key London team
Our key London team

What steps have you taken to capture market share in the APAC region and how big an opportunity does this area represent for you?

APAC remains an important market for us and we currently support clients in Japan, Hong Kong, Singapore and Australia. We have an office in Japan that supports our APAC business and importantly is staffed with fluent Japanese and English speakers, which has been a conscious decision as we remain committed to our valued Tokyo based margin brokers who supported our business in the early days and still rely on us to transact a large percentage of their volume with our 13 bank Liquidity Providers. 

In 2019 we plan to make progress on enhancements to our analytics tools, FX|Insights
In 2019 we plan to make progress on enhancements to our analytics tools, FX|Insights

As the business has matured over the last few years how have your own responsibilities as CEO changed?

In some ways they have remained the same and in other ways they have changed as we have added subject matter experts to our team. I remain very involved in the day to day operations of the Service as I want to ensure that the level of attention and support we provide remains as good as it was when we first opened the business. Often companies grow and the first thing to suffer is customer support. We have great technology, we have great Liquidity Providers, we have a wide product offering, but if the support degrades that’s the beginning of the end. We are committed to ensuring we don’t follow in the footsteps of more established businesses that forget what made them successful. Of course, as the business has expanded, and we have added great people to the team I’m able to - reluctantly - get out of some details and let the team do their job. I am extremely proud of the team we have in place and the care and dedication they bring to their job every day. 

What about your team members? Who are the key individuals that are responsible for the day today running of the business and how are they helping to service the banks and clients that use the firm’s offerings?

We truly are one team, and everyone plays a part in making sure we deliver to our banks and clients a great service. Whether it’s our CTO, our Head of Sales and members of our global sales team, our Head of Product, our many support and onboarding team members, our CFO and Controller, every person plays a key role in helping our valued clients, LPs and vendors partners get what they need from the Service. 

Brittany A. Callaghan is AVP Sales & Marketing
Brittany A. Callaghan is AVP Sales & Marketing

How important is the technology that underpins your business model and how are you going about investing in it to future proof your trading architecture and order management performance?

Technology is extremely important, and we are constantly making improvements whether hardware or software based. We closely monitor the capacity and performance of the Service and look to always stay many steps ahead of the growth we are experiencing related to data supported, client connections, vendor integrations, etc. Last quarter we started another round of infrastructure upgrades that will continue into the 3rd quarter of 2019. 

What work has your team recently been doing to expand your streaming services and API / GUI offerings to widen the trading that you now support?

We have vastly expanded our API and GUI offering since we first rolled out the Service, offering only a Spot FX API, and that continues through today. In addition to the product expansion, functionally today we support numerous order types, which include FOK, FAK, VWAP, IOC’s, Limit Orders and Slippage. Our limit order functionality is itself quite evolved allowing clients to execute using different order types. 

What does your product roadmap look like for 2019 and what plans do you have for adding to your existing range of services and trading solutions?

In 2019 we plan to make progress on enhancements to our analytics tools, FX|Insights. Although FX|Insights has only been in production for a little over a year the list of additional features just from client driven requests is quite extensive, which of course is great since clients like what is currently offered and now want more. We are also looking to make progress on adding algos and allocations, both of which are a significant undertaking, so these are longer term projects for us. 

The opportunities available for FXSpotStream remain as good today as they were in 2011
The opportunities available for FXSpotStream remain as good today as they were in 2011

You have said in the past that although FXSpotStream is no longer a “start-up,” it still behaves like one in the speed with which it delivers new products and functionality and how it remains flexible in addressing the needs of your clients and banks. Will that always be the case and, if so, how can you maintain that culture within the firm?

That’s certainly our goal. It’s about our culture, the approach we take to solving problems and delivering solutions and the high importance we place on customer service. We have distinguished ourselves as an organization that can work as a team and get things done. As a result, in a relatively short period of time we have become the leading disclosed streaming service bringing to the FX market much needed innovation and a new commercial model. 

What do you see as the main challenges facing FXSpotStream over the next few years and how will you be seeking to build upon your success still further?

The opportunities available for FXSpotStream remain as good today as they were in 2011 when the business was formed. As we grow and add more people to the team we need to make sure we remember how we got to where we are and continue to work in the same way that got us to this point. The approach we have taken of listening to our clients and banks and delivering what they need has worked extremely well and I’m confident if we follow the same approach we will continue to grow the business for many years to come.