Andrew, you have led oneZero’s growth from its launch in 2009. How did you get into the fintech business, and what attracted you to this industry in the first place?
When oneZero was founded in 2009, my business partner, Jesse Johnson, and I both had purely technical backgrounds. What attracted us both to the FX space were the unique technical challenges it presented. At that time, though the institutional side of the FX connectivity market was already in full swing, third-party retail trading platforms were just starting to gain traction. The fragmented nature of the FX industry, along with the wide variety of institutional venues and liquidity providers, created a very specific software architecture challenge. The demand for retail connectivity solutions not only dictated a need to be highly performant and stable but also flexible and adaptable to a wide range of platforms and venues. Though we started in a very retail-centric niche, we always kept in mind a long-term goal to transition into institutional-level connectivity, which dictated many underlying architectural decisions that are paying dividends today.
What do your day-to-day responsibilities usually involve and focus on?
My role at oneZero has evolved significantly over time. Early in the development of the company, we had an advantage over a lot of our competition in that we had two people, both with a deep technical understanding of our products, dedicated to the growth of the company. As the organization has grown, I’ve been able to transition to a more client-facing position, while Jesse has maintained a behind-the-scenes role in managing our development and quality assurance processes. Over the past two to three years, as a result of our continued investment in highly capable global operations resources and infrastructure, I’ve been able to step further away from the front lines and direct my focus toward business development. I take a lot of pride in being able to represent oneZero in the public eye via conferences and press coverage, but this is only possible due to the investments we’ve made in a solid foundation of people who run the day-to-day operations at oneZero.
Could you please tell us a little about your senior executive team and the key roles they each play within the firm?
Each member of our executive team brings a specific set of complementary experiences and skills to the table. As I’ve already mentioned, our CTO and my co-founder, Jesse Johnson, oversees our development and is still highly engaged in our architecture and core platform. Chris Kline, our EVP of Technology, worked with Jesse in his previous role at Irrational Games and manages the development team members, as well as numerous high-level coding responsibilities. Geoff Graves, our EVP of Product Development, sits between the business and development teams and works with both Jesse and me daily on feature design, requirements gathering, and testing. Matthew Kathman, our president and CSO, joined us from IBM and oversees the accounting, finance, corporate structure, and HR aspects of the business. Mike Leydon, who previously worked at Jefferies, is our EVP of Operations and manages our global team of support and IT staff.
oneZero has grown to become a global leader in enterprise-level software solutions for participants in the retail forex market. What do you see as the key strengths of the firm?
When we first decided to approach the retail FX market with enterprise-quality software solutions, we looked very closely at other firms already engaged in the space. What we determined is that, in order to succeed in this arena, we needed to follow three key principles:
1. Understanding our role as a technology provider, not a risk-taking entity.
2. Investing in only the best people, processes, and technology.
3. Holding ourselves to an uncompromising policy to be fair to both our clients and their clients.
Over the years, these core principles have governed how we’ve grown oneZero not only to address an exponential demand for our products but also to provide a solid foundation for further expansion and growth. Remaining focused as a technology provider; constantly reinvesting in quality, top-tier staff; and never succumbing to demands for any feature, product, or service that compromised our moral foundation has allowed us to confidently grow while still offering the same level of service our first client received from oneZero almost eight years ago.
What types of clients are oneZero mainly working with, and what range of services and solutions are you delivering for them?
Even when oneZero’s products were directly geared toward the retail space, our clients were generally those who demanded enterprise-quality technology. We have always been open to servicing brokers of all sizes, and many of our largest clients today were start-ups when we first began working with them. This being said, the reputation oneZero has earned as a top-tier provider of FX connectivity solutions came from the fact that our technology was able to handle the demands of firms who pushed the limits of retail platforms in terms of ticket flow, volume, and asset-class expansion.
Today, oneZero’s software products, hosting, and administration service offerings are widely used across the FX vertical. We service many of the highest-volume retail brokers around the globe. The release of our Hub solution and Margin Engine over the past 24 months has attracted prime of prime brokers and institutional FX liquidity providers who want to leverage our ability to access retail flow and handle the complexities presented by third-party platforms at a performance level that rivals legacy institutional platforms.
The key to our across-the-board success in servicing FX clearing institutions hinges on our continuous investment in a strong underlying core software architecture and our unyielding commitment to remaining a technology-focused firm.
oneZero’s Hub infrastructure was one of the first examples of a retail-focused technology that has also evolved into the institutional connectivity marketplace. What are the main components of your Hub solution, and what important benefits does it provide for your clients?
From an internal perspective, offering our Hub technology was a natural transition from our starting point in the retail connectivity space. When we originally entered the MT4 Bridging market, the gap in features between oneZero and the major aggregation and institutional connectivity platforms was significant. After spending five years building out our retail solutions and developing a technology base capable of handling the performance and stability demands of the retail market, we had expanded to 50+ different LP side connections and five different retail platforms (including our own FIX and REST APIs). At the point where we started offering our Hub technology, our solution had become feature competitive with many of the major institutional platforms.
The licensees of our Hub solution get the enterprise-level retail connectivity that oneZero has been known for since our first year in business. In addition, our Hub solution includes aggregation, FIX API access, liquidity management, and internalization controls that rival solutions traditionally only available to institutional brokers.
In what ways do you see the oneZero Hub product expanding from here?
Our plans to enhance the Hub are based on trends we are seeing across the board with our clients. The FX connectivity space is in a transitional phase. Broker’s margins are consolidating, and as a result, they need to get more out of their investments in technology. Clearing participants in the FX marketplace are no longer able to support separate bridging, pre-trade risk, back-office and front-end platforms. Brokers are also seeking more creative solutions to sourcing credit, as well as the tier one investment banks who previously provided a robust, trickle-down mechanism for economically clearing trades have all but retreated from the retail vertical.
Since the launch of our Margin functionality, which allows our broker clients to act as liquidity providers for other brokers and institutional partners (hedge funds, black box traders, etc.), we have seen a significant uptake in our technology among brokers looking to distribute liquidity on a margin basis. Our focus over the coming year will be to expand on this growth, adding new features for our Ecosystem partners, which creates additional incentive for retail brokers using oneZero’s technology to work with institutional brokers providing liquidity via oneZero technology.
Many brokers are now looking to expand into multi-asset class trading providers. How is oneZero assisting them in doing this?
oneZero started investing in features and technology specific to CFD trading as early as 2010. Though volumes in CFDs and other asset classes were quite low in the global retail market for some time, we predicted that CFD support would be an important next step in the evolution for brokers offering margin-traded products.
At face value, streaming additional asset classes, such as index CFDs or even single stocks, is not much different than offering FX to clients. Each instrument is uniquely identified and has a bid/ask price. Where oneZero has gone above and beyond is in providing a robust tool set to address the administrative challenges faced by brokers offering non-FX instruments. Corporate actions (dividends, splits, etc.) are handled natively within our platform. In one click, a broker can issue a dividend or split, which on many platforms would require hours of administrative overhead.
As retail platforms designed to handle multi-asset trading, such as MT5, become more prevalent in the years to come, broker clients who have developed a business model revolving around oneZero’s Hub will be able to seamlessly deploy new asset classes and liquidity providers without disrupting their legacy FX business or adding major administrative overhead in the process.
Last year’s SNB crisis is seen by many as a watershed moment for FX. In what ways do you think the impact of this event is still being felt most among legacy technology providers?
It is amazing to me that, more than 18 months after the SNB event, the dust is still settling in terms of the impact felt on credit, liquidity, and FX clearing in general. It was not a surprise to anyone when the more active tier one PBs pulled back on their exposure to retail and spot FX following the event, especially for those who took massive losses as the result of client liabilities and defaults. What has shocked many within the institutional FX space is that no one has really stepped back up, despite the clear demand that still exists for CLS-based clearing among FX brokers.
The void in the traditional give-up process created by the tier one PBs’ refusal to face retail, or at best the increase of two to three times the previous cost and margin requirements, has trickled down throughout the entire industry. Technology providers who traditionally pitched brokers on aggregating 10 to 20 direct-bank LPs are seeing many of their clients transition to more relationship-driven solutions as the result of a drastic change in clearing costs – or an absence of clearing options entirely.
Downstream in the retail space, this can be felt in increased clearing costs and a shift toward internalization of trade flow. While many of the retail-focused solutions for connectivity and order routing already had controls for internalization and warehousing of risk, many of the legacy institutional platforms lack the robust feature set needed to generate enough from client flow to offset the increased costs of hedging.
Many of the technology firms that originally dominated the FX OMS and aggregation space are now struggling to maintain momentum as the industry evolves. Why do you think that is, and what opportunities does it present for oneZero?
Pricing pressure is proving to be one of the driving factors for brokers to seek out new solutions for FX OMS and aggregation solutions. The maturity cycle of the FX space in general, catalyzed by the SNB event, has forced brokers to find ways to do more with less. Many of the legacy solutions in the space are still asking for $4+/mio for their aggregation platforms, which still lack robust compatibility with retail platforms such as MT4. Firms like oneZero are used to working with retail platforms, have developed the key institutional functionalities demanded by retail brokers and prime of primes, and are comfortable at the $2 to $3/mio price point.
Another key driving factor is the technology life cycle. Many of the legacy OMS and aggregation venues have reached a tipping point in terms of the cost versus reward of adding new features (such as expanded asset classes or risk management functionality) to their platforms. This means they are losing not only in terms of pricing power but also feature set. oneZero’s investments in extensible, flexible architecture from day one have allowed us to remain versatile in terms of our feature set while facilitating responsiveness to demand for new functionality during this consolidation phase.
It’s clear that relationships are now driving the pricing terms of liquidity provision. What implications does this trend have for firms like oneZero and the way you go about meeting the need by some of your customers for price aggregation solutions?
From a relationship perspective, managing multiple liquidity providers has always been an important part of maintaining an aggregate pool. The days of blending 20+ LPs and letting the banks fight for flow are all but over. The demand we are seeing from brokers today revolves around managing fewer, more direct relationships and doing so in a way that is fair and transparent to all counterparties. As costs have gone up, internalization has become less of a decision and more of a necessity. This has put strain on liquidity relationships and mandates careful, technology-driven considerations in terms of how hedging flow is routed and risk managed.
As we evolve our risk management solutions, we are working closely with brokers to make sure that their relationships and commitments to their LPs remain intact, while also addressing concerns related to increased cost of clearing and widening spreads.
Fintech products require constant reinvention and refining of their major architectural components in order to remain relevant. How important is research and ongoing product development to oneZero, and in what ways has the expertise of your engineering team helped you to combat the threats of aging technology stacks?
To date, investment in technology has been the primary reason for oneZero’s success, and we do not plan to deviate from that model any time in the future. Hiring the very best development talent available is the first step toward a strong R&D foundation. The way our platform is designed and constructed lends itself more toward adaptation and flexible development, rather than reinvention, to meet new market demands. One major benefit we have in working with over 100 brokers globally is that we can make sure that the feature set we deliver solves issues across our entire client base, not just isolated requests or one-off development initiatives. Continuing to involve our clients in the R&D process will be a key factor in maintaining our leadership position going forward.
You have said in the past that providing real-time operational support is an incredibly critical component in delivering successful solutions for the global fintech market. Why is this, and how difficult is it to achieve in the FX trading environment?
Aside from the technical challenges presented by the fragmentation of liquidity providers’ APIs and stringent performance demands created by financial markets in general, the 24/5 aspect of the FX business is the most defining factor of success (or failure) in participating in the FX fintech space. In order to tap into the broad global marketplace of FX brokers, a provider not only needs to provide distributed, flexible technology solutions but also be capable of supporting clients in deploying, managing, and troubleshooting any issues that arise. We are not managing websites or developing software to support 9:00 a.m. to 5:00 p.m. business models. Mistakes or delays in providing accurate and concise solutions to clients can cause hundreds of thousands of dollars in losses. Providing top-tier support and quality operational services is not a “nice to have.” It’s a necessity.
Our approach to operations at oneZero is simple: the person who picks up your phone call or email, regardless of the time of day or part of the world, will be able to answer your question or address your issues directly. We do not use call centers. We do not subscribe to the “kick the can” approach to regional support, where we attempt to stall clients until our main office comes online. For years, as we have entered into new markets, we have stuck by our own internal mandate to provide the same quality of support starting on Sunday at market open and ending on Friday. Managing a top-tier base of operations talent globally comes at a significant cost, both in structure and personnel, and it is a clear barrier to entry for many providers looking to succeed on a global scale.
oneZero already has offices in the United States, United Kingdom, and Australia. Where will you be looking to expand the operational footprint of the company to capture new business opportunities over the next few years?
There are two major regions that oneZero plans to expand in the next 12 to 18 months. The Asia-Pacific region has already proven to be a high-growth area for FX in general. Thus far, we’ve done a fantastic job servicing the Far East from our Australian operations base. Our goal in the short-to-medium term is to invest in local business development and language support in Japan, Singapore, and Hong Kong in order to further engage the thriving marketplace in this area.
Another area where we are seeing a tremendous amount of opportunity is in the MENA region. We’ve already taken steps to open an office in Cyprus, a well-known FX industry hotbed, and we have brought on Arabic language speakers to run this office and face the Middle East directly.
Retail FX is currently undergoing a “Connectivity Revolution.” As the industry undergoes rapid change, what do you see as the main challenges facing oneZero, and how are you positioning the company to meet these while remaining at the forefront of FX market technology?
The days of lax regulation, fly-by-night bucket shops, and cobbled-together technology solutions in the FX space are behind us. For many firms, this is the end of the “gold rush” era in this marketplace. For oneZero, this trend is something we have been preparing for (and looking forward to!) for many years. The connectivity revolution we are seeing unfold before our eyes is driven by a combination of multiple forces: increasing price pressure, consolidation of technology between retail and institutional providers, and a maturation of the retail margin trading space as a whole.
At oneZero, we are already reaping the rewards of our efforts as legacy technology platforms fail to adapt quickly to this rapidly changing marketplace. Keeping pace in this new environment means sticking to what we have done for years: focusing on technology, hiring great people, and providing excellent service to our growing client base. Though many micro-challenges present themselves as part of this transition, we see the overall trend as a massive opportunity for our firm and our clients to leverage the strong foundation we have built over the last eight years.
A decade from now, the FX space will be a very different market, but I am confident in oneZero’s position as a leader of the connectivity revolution. Having secured a role in initiating this transition, I look forward to the challenges that the future of the FX markets, and fintech in general, will bring.