Peter Durkan

Lucera – Reducing the friction involved in FX trading

July 2022 in Product Reviews

Lucera provides on-demand co-located infrastructure, connectivity, trading, and distribution software for institutional financial firms. With its proprietary trading software, connectivity network and technology ecosystem, Lucera is able to meet the performance and time to market demands of financial trading. We asked Peter Durkan, CEO of the company to tell us more about how it is meeting the needs of FX trading firms.

Why are increasing number of FX market participants looking for a new approach to their trading infrastructures to support their strategies and business growth plans?

As FX markets have become increasingly electronic, data volumes have exploded. To consume and analyse this data in a meaningful and timely manner, market participants need to continually upgrade their infrastructure.

In parallel, the FX market continues to be fragmented. While primary venues and ECNs remain a key part of the ecosystem, the continued growth and success of non-bank LPs providing a high quality 24-hour pricing service has allowed clients to diversify their liquidity pools with increased bilateral trading. This, in turn, has led to a more pronounced need for scalable, robust, and agile connectivity for both distribution and consumption of liquidity.

LumeMarkets, Lucera’s cross-asset trading platform comes with next generation TCA and Reporting

The ongoing growth in the digital asset space means more and more traditional FX market participants are expanding into trading digital assets. While similar to FX, this nascent space has its own set of challenges – for example a marketplace that runs 24/7, intra-day settlements, web-based APIs etc. Some of these differences add operational complexity and again requires operating scalable, reliable software and infrastructure.

In summary, if you are running an electronic trading business in FX or adjacent assets, an agile, scalable infrastructure is a key component of a successful business in order to make sense of rapidly changing markets.

Lucera Connect leverages a FPGA based system which allows us to build a very low latency, high performance SDN.

Many trading infrastructure solutions still lack the security, performance and reliability required by FX market participants. How is Lucera’s business model designed to address challenges like these and deliver future proof solutions?

With a heightened dependency on both the scale and speed of data, clients have greater requirements for reliability and performance. While its straightforward for technology vendors to purchase several servers and place them into a co-location environment – the greater challenge is to ensure the performance, reliability, and security of the platform.

Performance and reliability are core pillars of our systems. When we speak about performance we mean deterministic performance – being fast most of the time is not enough. It is about how your system behaves during market events and high-volume environments – our systems remain performant through all market events.

Please give us an overview of how Lucera leverages state of the art technology and the key products and services you currently offer.

We have several different product offerings which use new technologies. For example, Connect leverages a FPGA based system which allows us to build a very low latency, high performance SDN. On the hosting side, we’re continually exploring the latest chip designs from AMD and Intel. We also work very closely with Xilinx and the Solarflare team as well as other infrastructure providers. Our Lume product suite is built on modern C++ on the backend and leverages some of the latest open-source software, while building our own proprietary communication protocols.

We are constantly enhancing our products and believe in a continuous release cycle. A lot of these changes are identified through a consultative approach with our clients, but also through proactive internal analysis and product design.

Your intelligent FX trading platform LumeFX is a distributed matching and aggregation system. Please tell us about its key features and the benefits of its adaptive smart order router.

Our Lume product suite is built around a core distributed system, which is comprised of individual services which are integrated through our proprietary messaging protocol. We have agents that consume data, agents that distribute data, matching engines, trading controls, and credit engines to name a few. All of these components are linked through a low latency reliable communication protocol with no single point of failure. This approach gives us a huge degree of flexibility on releases and new features for our clients – it is extremely modular and as long as we keep the intra-component protocol the same, we can have different versions of components running at the same time. This allows us to do some pretty neat things around instrumentation and system analysis.

The system is extremely configurable and feature rich. We have an extensive array of matching paradigms and methodologies, a multitude of different ways of publishing, aggregating, and consuming the data and we have an adaptive SOR to allow for intelligent routing of orders. Users can use as much or as little of the system as they need for their business.

LumeFX is an adaptive, intelligent platform

What is your LumeMarkets platform designed to do and what core functionality does it have?

LumeMarkets is based upon the core distributed system of Lume. We expanded the core and abstracted some of the data structures to allow us to aggregate any type of market, and distribute into any market, with the first iteration of that being US Treasuries, EGB’s and Futures.

We are also adding a D2C component and are in the final stages of testing our spreader – for basis trading and multileg strategy creation. We’re very excited by these new products and hope to have them both rolling out later this year.

Like everyone else we’ve also been working on crypto capabilities over the last year or so. We’ve done a lot of work in the digital asset space connecting and aggregating liquidity sources for cryptocurrencies –this is a very natural extension of our products – and I expect both our rates and crypto offering to grow significantly over the next few years.

It uses a new paradigm for matching engine and SOR. Each client runs in its own instance removing any single point of failure, while allowing easy management and expansion.

What work has Lucera been doing to increase your global footprint and widen your client coverage?

We have a hosting footprint in several data centres across the world and have added to our sales team in Europe and in the US, while also looking to expand in Asia – in response to the growing Asian market and our increased global footprint, alongside the additional products mentioned. We are now fully global in terms of our Support, Engineering and Development teams – however, our goal is to increase our footprint significantly in Asia over the next 12-18 months.

What plans do you have over the coming months for rolling new products and services?

For our Fixed Income offering we are aiming to launch our D2C offering and spreader in Q4, while on the Crypto side we are continuing to add venues and working on custodian integrations. We spent a lot of time listening to our client requests and working with them to enhance the functionality of our product. This approach allows us to target areas that help our clients grow their business.

How would you sum up Lucera’s value proposition for those FX trading firms who are struggling with expensive, impractical vendor solutions and internal IT teams without the time or resources needed to meet the demands of their businesses?

It’s simple and I believe our clients can attest to it – we are very practical. We understand the market and can help you onboard and grow your business quickly. Our offering is a month to month offering, which is commercially flexible. We do this to build long-term partnerships with clients rather than transactional relationships. Our goal is to reduce friction and make it quick and easy for users of our services to access, consume and trade new asset classes in new markets. Removing this friction allows them to focus on what matters – growing their business.