David Mercer
David Mercer

LMAX Exchange: Spotting the difference

First Published: e-Forex Magazine 58 / FX on Exchanges / October, 2014

Servicing brokers, funds, corporates, asset managers and banks, LMAX Exchange is an FCA regulated MTF (Multilateral Trading Facility) for FX trading.  LMAX Exchange delivers a unique vision for global FX trading providing a transparent, neutral, level playing field for all market participants, regardless of status, size or activity levels.

The LMAX Exchange OPEN order book is driven by streaming, non ‘last look’ limit orders supplied by General Member liquidity providers. Re-launched in 2011, offering a range of key products, including spot FX, precious metals, commodities and equity indices - LMAX Exchange guarantees complete pre/post-trade transparency and strict price/time priority order execution (where no ‘last look’ is standard) at an average speed of 4ms.  

David Mercer, CEO of LMAX Exchange, says: “We are very happy to be aligned with derivatives exchanges. The MTF principle of an open order book, whether it is trading FX, derivatives or equities, is one that we fully adhere to. Whether for derivatives or FX, the MTF model delivers traders the quality and consistency of firm, limit order execution.”

However, the key difference between LMAX Exchange and derivatives exchanges offering FX instruments is that LMAX Exchange operates in the spot market rather than the derivatives market. Says Mercer: “The greatest liquidity in the FX market is in the spot market and no matter how much volume there is in short-dated futures, it is dwarfed by the spot market. We are squarely in the spot market, with deeper liquidity, but offering the same quality of execution that you expect on exchange.”

With the regulators pushing hard against the OTC market in favour of more transparent market places, LMAX Exchange offers a timely alternative in the spot market to single bank portals and dark pools by bringing the same features of exchange trading to spot traders. Says Mercer: “Obviously we believe this method of execution is preferable to the end-user and it is what should be expected. I don’t think there is any place anymore for bilateral deals and the ability to ‘last look’, reject or re-quote an order.”

However, he adds that while he believes an open order book is the way forward, FX is a massive asset class and the industry is perhaps still a long way away from having one central limit order book similar to the equities market and now in futures exchanges, but Mercer firmly believes that the MTF model for FX is a step in the right direction and says that he is happy to lead that way with LMAX Exchange.