Richard Elston
Richard Elston

CMC MARKETS - Talking with the magicians of liquidity

CMC Markets institutional suite provides top class liquidity services across multiple asset classes. The company offers a flexible approach so that clients can connect to its liquidity by using either proprietary trading platforms, or via third-party technology. We talked to Richard Elston, Group Head of Institutional at the firm to tell us more.

CMC Markets institutional suite provides top class liquidity services across multiple asset classes. The company offers a flexible approach so that clients can connect to its liquidity by using either proprietary trading platforms, or via third-party technology. Its cutting-edge technology and execution coupled with extensive support and expertise can help businesses to expand into new markets, offer new products and increase revenue potential. We talked to Richard Elston, Group Head of Institutional at the firm to tell us more about its services and how this award winning business has been faring during the recent pandemic.

Richard, please remind us about the full range of institutional offerings that CMC Markets currently provides and the types of clients you are catering for. 

Essentially what we’re providing the market with is a technology-led solution for a wide range of financial services companies who are seeking multi-asset class liquidity. Beyond that we also provide consulting services and reporting solutions all available via API. Our range of services make our offering applicable to a number of different client types meaning that every day we’re working with the likes of banks, hedge funds, money managers, family offices and other retail brokers, giving them access to consistent pricing and market depth across almost 10,000 different instruments.

What impact has the COVID-19 crisis had on the institutional side of the firms business? 

The significant increase in volatility has driven a sharp increase in volumes for us in very much the same way as has done for most of our peers. Perhaps more interesting however is the fact that the fast moving - and at times less liquid than normal market - has provided a real-time test for our technology – one that it passed with flying colours. 

Our approach of employing connectivity to multiple counterparties for price construction meant that even when some were unable, we could continue to provide a tradable price for our clients. Equally, our systems were able to manage comfortably even when inbound tick rates spiked dramatically higher. It has been a testing time for many but we are proud that our technology - and our team - have lived up to expectations. 

This crisis looks set to continue for a while yet. Do you expect global markets activity and volatility to remain unusually high and if so what opportunities will that present for you? 

What we have noticed in recent months is that volatility ebbed away from those peaks we saw earlier in the year. The resulting price action however, combined with the inability of some participants to quote continuously has elevated the standing of liquidity providers such as ourselves. The crisis also illustrates the advantage we have when it comes to maintaining our own technology in house – that rapid shift to home working was completed seamlessly, helping us maintain the same quality service for our institutional (and retail) clients throughout. It’s the resilience we were able to show across the board that we feel leaves us better positioned than many for the next black swan event.  

How do you see the FX Liquidity marketplace evolving and in what ways can CMC Markets assist those firms who are seeking multi-asset exposure, but find themselves constrained by the FX-centric provision of other liquidity providers? 

We are continuing to see evolution when it comes to liquidity and now more than ever, this is definitely promoting the fintech and non-bank providers including ourselves. There’s a whole bunch of factors influencing this, but CMC Markets’ advantage comes from us having strong relationships with tier one liquidity sources, our strong balance sheet and the fact we also have a big book of internal retail flow. What that means is we can tap into almost 10,000 different assets and quote prices that are not only consistent, but also offer this at depth that can frequently be better than is seen in the underlying market.

How does adding CMC Markets’ rich liquidity mix help many of your clients to add another dimension to their own business propositions? 

Once again, there are a number of advantages here. For clients that may have set out with strategies that revolved largely around FX, they may now want to be able to invest in other asset classes. Whilst they could go to a different provider for each asset, that comes with issues such as cross-margining and impacting volume discounts. It can also make reporting more cumbersome than it needs to be. 

By working with CMC Markets, clients can access a one stop shop, offering almost 10,000 different instruments, as well as configurable back-office reporting systems, too. Similarly, retail brokers looking to partner with us are increasingly finding that clients want to look beyond a handful of FX crosses, especially as the volatility in currency markets – which drove a lot of acquisition in recent months - ebbs away. Using either our direct API or working with us on a white label basis, they can easily offer their clients a wider range of assets without incurring a hefty technology burden along the way. 

What are your institutional and professional partners telling you about how their own clients’ expectations are evolving and how is that influencing how you invest in new products and grow the business? 

We know there’s this growing demand for a wider choice of assets both amongst direct institutional clients and also from those counterparties working with retail end-customers. We regularly receive feedback on the quality of our proprietary technology, which continues to be our focus along with the minimisation of market impact and achieving ultra-low latency. This approach helps us to further improve the client experience from execution speeds to more competitive pricing. 

Earlier this year CMC Markets launched a new Prime Derivatives platform in Australia. What does the new platform provide and what benefits does it offer clients? 

Our Prime Derivatives launch in Australia was the second stage in our global roll out offering our clients an institutional quality product which gives trading desks direct market access alongside a number of other attributes. These include the ability to trade pre and post-market, it incorporates the necessary market data subscription packages clients need and can also facilitate algorithmic execution of trades, something that is especially important when handling large orders in less liquid markets. 

Where and how will you be looking to further expand the client base and product mix of your institutional offerings over the coming months? 

As a business we innovate all the time, something that is made easier by the fact we develop and maintain our technology in-house with our team of 100+ developers. We have a series of major releases due to be launched in the coming months, including our FX spot product. This will be followed  by the release of a number of additional FX products including options, forwards and NDFs, all of which will help bolster CMC Markets’ offering for institutional clients.