GTX: The Electronic-Voice Hybrid that delivers a full service offering

e-Forex talks with Vincent Sangiovanni, CEO of GTX, the institutional arm of GAIN Capital Holdings, Inc.

First Published: e-Forex Magazine 72 / e-Forex Interview / July, 2016

Vin, you have more than 20 years foreign exchange experience and have held senior positions at several major brokerage firms. What’s kept you interested in FX over all that time?

Since my first day as a voice broker, the market has experienced a continuous arc of change and innovation.  Since 2010, when we launched GTX, we’ve had the opportunity to bring innovation directly to the markets through our ECN, SEF, swap dealer and prime services offerings. 

What do your day to day company responsibilities usually involve?

I look after three main areas. I keep our strategy focused on GTX’s core value proposition, liaise with key buy and sell-side clients and mostly support the stellar team we have running the various parts of the company. 

Who are the other key members of the GTX Management team?

We have a great group of market veterans throughout the company.  Our key managers include Graham Beale, who heads up business development, John Miesner, our global sales head, Steve Reilly, who heads our ECN and SEF liquidity, Thomas “T-Bone” Marano, who handles relationships with some of our most important bank and fund clients, and Scott Harrington, who leads our IT team and is the architect of our entire technology infrastructure and platforms. 

GTX provides ECN, SEF and agency execution and clearing services to meet the liquidity, credit and regulatory challenges facing FX market participants. What types and range of clients are you now providing services for?

We have more than 350 institutional market participants including tier 1 and regional banks, which both make and take liquidity. Buy-side clients include hedge funds, proprietary trading firms, CTAs and individuals who meet professional trader criteria in their respective domiciles. 

John Miesner is global head of sales
John Miesner is global head of sales

What do clients particularly like about the GTX value proposition?

Primarily clients like GTX’s “ecosystem” approach, which supports integrated access to electronic and voice trade execution capabilities via a prime broker account. Clients have the ability to participate in the various execution platforms or agency service that makes the most sense for a given trade, in any currency, product and market condition. 

Also, this can all be done via a single prime brokerage account, which enables credit efficiencies when trading across products or currencies.  

The GTX ECN model is organized around hubs operated by CCPs. What advantages does that model have?

The centralized hub model provides efficiencies from credit and operational perspectives over multilateral models.  

In order to achieve optimal liquidity/price streams in a multilateral model, for each user client, each liquidity provider must have established reciprocal credit limits to all alternate potential matching liquidity providing participants. 

GTX – The Electronic-Voice Hybrid that delivers a full service offering

In the case of GTX’s centralized hub model, in order to achieve optimal liquidity/ price streams, all that is required is for the Tier 1 CCP to establish reciprocal credit limits to the alternate potential liquidity providing participants. This also creates operational efficiencies as all liquidity providers and end-user clients, in the centralized hub model, face the CCP as counterpart to all transactions, making the reporting of all transactions much more streamlined.

Not one, but three leading FX prime brokers operate their own GTX hubs, which creates additional benefits. 

In what ways have you worked to position GTX at the forefront of ECN technology?

From the outset, we were able to source ECN technology from Forexster, which built the most robust, flexible and innovative trading platform we had ever seen. Among its innovations was its capability to run multiple liquidity pools without performance degradation; a real-time, pre-trade credit engine, which operates within the system, and the capability to gross up small trades into a single ticket.  This technology forms the foundation of our IT infrastructure to this day, enabling us to introduce new functionality on the ECN and to launch a swap execution facility.  

Given the critical nature of technology, we purchased key intellectual property, patents and exclusive rights to the technology in 2014, which ensures we will have a stable operating infrastructure going forward.  

Last year GTX implemented new rules for liquidity providers. What did you set out achieve by refining the rules of engagement of your liquidity provision? 

We had two main goals when we implemented our Rules of Engagement. 

The first was to improve trading performance on the ECN with respect to fill ratios and making our pre-trade market data more useful and reliable.  This is something that we’ve strived to do from early days. 

The second, but equally important aim was to create a level playing field for all participants with a transparent, public rule set. 

Since publishing the new rule set, clients have told us they appreciate our transparency on this issue. 

GTX – The Electronic-Voice Hybrid that delivers a full service offering

GTX recently launched high-speed binary market data protocols on your FX ECN. Why were these developed and who will benefit from them?

It’s clear that low latency market data is very important to algorithmic traders including model driven market makers and consumers of liquidity. Binary market data protocols enable these market participants to process data more quickly than possible via FIX and other standard protocols. 

Earlier this year, we launched a set of standard binary protocols, written around the widely used ITCH protocol and others that have been used for years. 

We also went a big step further, writing and rolling out a set of binary protocols such as GTTP, which is a proprietary binary protocol based on a new framework currently being standardized by the High Performance Working Group of FIX Protocol Limited.

Clients like GTX’s “ecosystem” approach
Clients like GTX’s “ecosystem” approach

We also made the decision to offer binary market data protocols free of charge to clients. This is in keeping with our commercial model to not have multiple fees on the platform. 

Also, we wanted to encourage the use of the new binary protocols, because we believe their adoption will enhance liquidity on the ECN for all participants, not only those that use them directly. 

Thomas Marano handles client relationships
Thomas Marano handles client relationships

Your flexible credit solutions include direct bank access, prime brokerage accounts and GTX Direct. How do these help GTX to broaden its appeal and access an increasingly diverse range of market participants?

Being able to offer clients credit solutions that best fit their needs is essential.  This is especially true in the aftermath of the January 2015 SNB dislocation, which is still rippling through the FX prime brokerage market. 

We support a range of credit and margin accounts to enable clients to use the right structure, or mix of structures, to support their trading.  Our range of accounts supports clients with direct bank lines, fund managers and others with prime brokerage credit. 

In addition, GTX Direct is a value-added prime service offered by GAIN Capital in the UK. GTX Direct users benefit by leveraging the prime brokerage relationships of our parent GAIN Capital.  GTX Direct clients participate in client-to-client trading on the GTX ECN and can opt for the added protection of having their margin assets held in a segregated account at a leading global bank. 

With this range of credit structures, clients can be onboarded quickly using their existing bilateral credit or prime brokerage accounts or directly via GTX Direct. 

full electronic and voice execution services
full electronic and voice execution services

What do you see as the main benefits provided by the GTX Swap Execution Facility?

We set up the SEF provide a compliant venue for GTX clients to trade on as regulations were introduced to the market.  Although many rules and regulations are still being drafted, a number of hedge funds expressed interest in trading NDFs on a SEF. 

Enabling them by setting up the SEF is core to our mission of providing a range of electronic venues and agency execution services. That way our clients can select the best approach to trading as well as regulatory considerations.

Steve Reilly heads up ECN and SEF liquidity
Steve Reilly heads up ECN and SEF liquidity

What range of services does the The GTX Execution Desk provide and how personalised do you make these?

Our registered swap dealer provides agency execution services for any FX product or structure. There is an important collaborative aspect to how our swap dealer staff works with clients. They talk through the product structure and range of execution tactics, provide market color and then work the order. Although the client name is reported post-trade, clients appreciate that the street sees only GTX while the order is being worked and at the point of execution. 

Clearly, information leakage and market impact can be significant for institutional clients, trading through our agency desk reduces those significantly. 

What White Label Services does GTX offer and how strategically important are these to the firm?

We have taken a different approach to white labelling the GTX ECN.  We believe in the price discovery element of ECNs, so we are careful about doing deals that would increase market fragmentation. We prefer to license our technology to firms that represent true market innovation in FX or other asset classes. 

GTX’s hybrid electronic-voice model provides great value in the current market
GTX’s hybrid electronic-voice model provides great value in the current market

What steps have you been taking recently to bolster the Institutional unit at GTX?

We’ve been expanding on all fronts. As mentioned previously, we recently released leading edge binary market data protocols.

Also, we’ve been expanding our team, recently bringing in a senior sales team for our registered swap dealer. 

We’re close to announcing some key product roll outs on our platform. Lastly, our SEF recently received full regulatory approval, superseding the temporary status it had been operating under since we launched in 2014.  

GTX ECN Volumes
GTX ECN Volumes

So we’ve gone forward with key hires, significant technology upgrades and new products.  We have a lot of exciting things in the pipeline too, so stay tuned.  

What do you see as your primary markets and what plans do you have for extending the GTX business footprint into new regions around the world?

Today our primary markets are the US and Europe, but we are moving aggressively to export our different trading models and venues to key markets in Asia and elsewhere.  To support this global expansion, we have made key hires in Asian financial centers. 

We are also well along the process of deploying servers in the key FX data centers in London and Tokyo. 

We expect these to go live in the third and fourth quarters of the year. 

GTX posted a record year-to-date volume record of USD 17.8 billion (single count) on January 29, 2016. How will you be looking to build on that success this year and what are your key objectives for the business over the next few years?

Our clients tell us GTX’s different trading models and venues provide great value in the current market where traditional liquidity and credit providers are rationalizing their role and regulation is playing an increasingly important role in deciding where and how to trade.  

Providing an integrated set of platforms and services to enable clients to trade in the current and future liquidity, credit and regulatory environment will continue to be our core mission.  

That’s what’s gotten us from start-up volumes in 2010 to the levels we’re trading today. And we believe if we continue to get it right, growth will surely continue to follow. 

The e-Forex Interview