David Mercer

Together the firms will offer a broader suite of solutions, including expertise in the FX swaps and forwards market, and spot FX and non-FX asset classes expertise. 

“We believe that with the acquisition of FX HedgePool, our combined client base will benefit from access to a wider suite of products and increased global distribution,” said David Mercer, chief executive, LMAX Group.  

“Following this acquisition and that of Cürex last year, we now have a compelling proposition for asset managers and other buy-side participants in addition to serving our core bank, broker and proprietary trading firm segments.” 

LMAX Group and FX HedgePool are focused on providing greater transparency, efficiency and fairness across the FX ecosystem while providing better accesses to institutional grade liquidity, confirmed the firms. 

Currently, FX swaps account for more than half of total daily FX turnover and are the most traded instrument (in excess of $3.8 trillion per day).

This deal follows LMAX’s acquisition of FX-focused execution services and data analytics provider Cürex last year.

Jay Moore, chief executive and founder of FX HedgePool, asserted that “this significant milestone for FX HedgePool and our community marks the start of a period of considerable innovation. The established yet agile, LMAX Group, complements FX HedgePool’s proven ability to introduce groundbreaking solutions for the modern trading desk. 

“Both firms are aligned in delivering innovative products that set new standards for transparency, fairness and efficiency, and we look forward to an exciting future.”

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The launch follows the Group’s global institutional FX exchange, LMAX Exchange, receiving a Recognised Market Operator (RMO) licence from the Monetary Authority of Singapore (MAS) in November last year. 

Read more: LMAX Group given green light for NDF trading in both Singapore and London

The FX NDFs are traded on a central limit order book (CLOB), delivering transparent price discovery and execution to all market participants including banks, non-banks, proprietary trading firms, institutional brokers, asset managers and buy-side institutions.  

“We are delighted to go live with this offering, which will provide local FX market participants with access to an expanded pool of NDF liquidity through a regulated exchange venue and a CLOB model that delivers efficient market structure and transparent, precise, consistent execution,” said Matt DellaRocca, head of liquidity and analytics, APAC at LMAX Exchange. 

“We look forward to supporting our global customers as we expand our FX offering for customers operating in the Asia Pacific region.” 

The launch will initially target Asia Pacific and will support increasing regional demand for FX NDF trading and access to institutional liquidity as well as enhanced FX market structure. 

LMAX Exchange’s FX NDF trading via Singapore and London will initially offer top Asian USD crosses including Indian Rupee (INR), South Korean Won (KRW), New Taiwan Dollar (TWD), Chinese Yuan (CNY), Indonesian Rupiah (IDR), Philippine Peso (PHP) and Malaysian Ringgit (MYR), with LATAM crosses expected to be offered at a later stage.  

“The launch of NDF trading by LMAX Exchange is a significant step forward in the growing importance of Singapore as a hub for FX price discovery,” said Paul Buttenmueller, global head of eFX trading at UBS. 

“This will improve market access to local pricing for Asian emerging market currencies, building liquidity and supporting volume growth of NDFs.”

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The approval came from the Monetary Authority of Singapore (MAS) which granted the exchange a recognised market operator (RMO) licence. 

Through this move and the launch of NDFs, LMAX clients will be able to hedge their FX exposure against non-convertible currencies on a central limit order book (CLOB).

The business expects this to lead to transparent price discovery, deeper liquidity and efficient market structure.

David Mercer, chief executive of LMAX Group, said: “The Monetary Authority of Singapore is among the most progressive and innovative regulators globally. We look forward to a continued, symbiotic relationship with MAS as we progress our expansion plans and build out our cross-asset product offering in the region for the benefit of local customers and the broader, vibrant, Asia Pacific market.” 

Read more: LMAX Group to acquire Cürex’s FX business in institutional push

The RMO licence came following LMAX Group’s compliance with the regulator’s principles – in accordance with international standards and best practices. The factors include upholding high standards around compliance, risk management and corporate governance.  

Matt DellaRocca, head of liquidity and analytics, APAC, LMAX Exchange, said: “As Singapore becomes an increasingly important hub for global FX trading, we are delighted to have the support and recognition from MAS. 

“We continue to expand our product offering to meet growing local demand for transparent price discovery and access to deep institutional liquidity and look forward to strengthening our institutional client relationships across Asia.” 

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LMAX confirmed in a statement that the cash acquisition values the London-based group at $1 billion and CEO, David Mercer, will continue to lead the business after retaining a substantial stake in the firm with his management team.

The FX markets specialist operates five exchanges globally with matching engine infrastructure in London, New York and Tokyo. LMAX expanded its operations into the crypto space in 2018 and launched LMAX Digital for spot crypto trading, which now serves more than 500 institutional clients.

“The LMAX Group exchange infrastructure offers efficiency and transparency, both of which are in high demand by the growing numbers of institutional participants in foreign exchange and crypto currency trading,” said Chris Flowers, managing director and CEO at JC Flowers.

“David and his management team have driven considerable international growth in recent years, and we look forward to supporting them as they continue to expand their support of the world’s top institutional market actors.”

LMAX added it will use the funds and partner with JC Flowers to expand its business in both FX and crypto in the US and Asia. The trading venue recently hired the former Euronext FX global head of sales in a new role to lead the firm’s sales efforts in the Americas.

JC Flower’s minority investment in LMAX marks another major deal for crypto as market participants continue to launch platforms and venues aimed at institutional investors engaging with digital assets.

Last month, interdealer broker TP ICAP confirmed plans to team up with Fidelity and Flow Traders to launch a crypto platform, while German exchange group Deutsche Börse acquired a minority stake in crypto trading and brokerage firm, Crypto Finance.

“This is a significant milestone in the evolution of LMAX Group that vindicates our industry-leading business model and the role we have to play in the foreign exchange and crypto currency markets of the future,” LMAX chief executive, Mercer, commented.

“Not only have we identified a like-minded partner in JC Flowers who understands global capital markets and brings valuable connectivity to strengthen LMAX Group’s presence in North America and Asia, but one that shares our vision of building the company into the pre-eminent global FX and crypto currency exchange.”

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David Mercer, CEO of LMAX Group

The chief executive of foreign exchange and cryptocurrency exchange operator, LMAX Group, has said that the firm’s introduction of weekend currency trading services for institutional investors could lead to 24/7 spot FX trading within the next five years.

Weekends can be an uneasy time for institutional investors as traders are forced to wait until the next working day to respond to key impactful events that may have taken place.

24/7 news coverage has meant weekends are no longer considered a period of relaxation but are instead met with dread by traders as a period when they are not able to react to market volatility outside of working hours. LMAX Group believes the new Weekend FX service will offer a solution to this problem.

“International trade is 24/7 and there is a lot of cross-border business, so why do foreign exchanges finish at 5pm New York time on a Friday, and open at 5pm New York time on a Sunday night? What happens to the rest of Asia, which is already open?” said the chief executive of LMAX Group David Mercer. “Why do you have to take that risk over the weekend? Why do you have to bite your fingernails while politicians have meetings? I think it is a natural extension of the world we live in today, and I can find no reason why we don’t trade FX at the weekend.”

So why are markets closed to institutional investors while retail investors are left unrestricted? FX markets have historically coincided with banking hours and have therefore been closed during the weekend. This closure allowed market participants to process trades and settle their books. However, these processes have since become obsolete as payment systems are no longer tied to banking hours. The unnecessary closure of markets during the weekend creates the potential for institutional investors to miss out on a crucial period of trading activity.

The new Weekend FX service offered by LMAX Group will be open to clients from the time markets close on Friday at 5:05pm until 5pm on Sundays. Initially, the Weekend FX service will support two currency pairs, Euro\Dollar and Dollar\Yen, which the exchange has said offer more natural liquidity. This offering will eventually, be expanded to cover 90 currency pairs which LMAX already offers during the usual working week.

Mercer said the inspiration for the service came from institutional liquidity providers: “I have institutional liquidity providers putting quotes into my FX exchanges 24\5 and a half. The same liquidity providers started to quote crypto on a 7-day week basis, 24-hours a day. The natural extension was to get them quoting some currency pairs.”

Retail broker IG has also launched a weekend trading service that trades in GBP\USD and its own Crypto 10 index for retail and CFD traders, however, LMAX has a wider institutional client base.

Advances in FinTech coupled with the increasing appeal of being able to trade 24/7 with cryptocurrencies could mean now is the right time to implement weekend trading. Current remote working conditions has also forced the industry to adopt new technologies.

Most companies are looking for new ways to adapt their businesses to social distancing guidelines imposed by the government in response to the COVID-19 pandemic. It is likely that working from home will become more popular even after the UK lockdown measures have been fully lifted, and companies will be eager to operate with a reduced headcount physically present in the office.

This could lead to firms encouraging staff to work more flexible hours and institutional investors using Weekend FX trading as a potential solution to splitting up the working week. “We consider a full move to 24/7 spot FX trading a real possibility within the next five years, with Weekend FX representing a clear step forward in achieving this goal,” said Mercer.

However, while Weekend FX has received support from institutional investors equity markets in Europe have been campaigning for shorter market hours to drive diversity in the industry, and improve the wellbeing of traders. A consultation to proposed shorter market hours, held by the London Stock Exchange (LSE) earlier this year, received widespread support from market participants. Although, a minority argued that market hours should remain unchanged.

Advocates of reduced working hours are clear that all exchanges would have to implement the change unanimously. Others have warned there is potential for additional dislocation, market complexity and fragmentation should one trading venue agree to reduce trading hours independently instead of taking a harmonised approach across Europe.

LMAX’s Mercer said he understood the bid for shorter equity market hours, but highlighted the contrasts and nuances of FX markets compared to equities markets. “The FX market is 15 to 16 times bigger than the equity market and it is running 24 hours, 5 days a week,” Mercer said. “It is very possible that a significant market-moving event can happen after a session close. It is very possible that can also happen at the weekend, and could happen overnight even on a normal working day. What happens to a position you have? Are you supposed to sit on it or scramble around once markets open? Surely markets become more efficient if they are perpetual.”

He insisted that a lot of investors are time-rich during the weekend and it makes sense for them to be able to rebalance their portfolios and hedge or mitigate their risk during this time instead of rushing during working hours.

Market volatility surged during the height of the coronavirus pandemic and the implementation of lockdowns across the globe. Although, despite the unpredictability of markets, Mercer believes that confidence is returning.

“What you saw was extreme volatility in the middle of March, extreme sell-off in equities and panicked markets. But we saw some normality afterwards. Capital markets are good at being resilient, bouncing back and accepting this horrid phrase we now all refer to as the new normal,” Mercer said.

“I think overall when I look at LMAX Group liquidity, I am very pleased with how the liquidity held up. It was a bit nerve-wracking at times during the heights in March, but we came to this normality in April and May where there was a lack of volatility – it was very much a risk- off environment… All of sudden there is this element of fear around the markets that is good long-term but not so good short-term. You had this risk-off environment, only now they’re getting back confidence and re-entering the market again.”

To watch the full interview with LMAX Group’s chief executive, David Mercer, click here.

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Known as Weekend FX, the service will allow trading from 5.05pm EST on Friday to 5pm EST on Sunday when spot FX markets are closed. LMAX claims the launch marks the first institutional grade exchange infrastructure to facilitate trading outside of market hours.

The new service was established amid demand from investors and liquidity providers to trade and hedge FX exposure when the underlying FX market is closed. Market-moving announcements and events taking place outside of FX market trading hours has also increased, impacting the ability for traders to react or capitalise on opportunities quickly.

“The last few months have reinforced the common understanding that volatility doesn’t stop on a Friday night and risk events have now extended beyond the working week,” said David Mercer, CEO of LMAX Group. “As a result, the current trading session doesn’t reflect market participants’ increasing need to access FX liquidity 24/7 in order to exchange risk – this puts significant pressure on the FX market to move with the times and become fully accessible seven days a week.”

Mercer added that the LMAX team sees the launch of the Weekend FX service as the first step for all asset classes and markets transitioning to complete open market access. He is also certain that there will be long-term demand for the service, and predicted spot FX trading will soon move to 24/7 trading.  

“We are very confident of long-term demand for this service, given the unassailable move to 24/7 FX trading on the back of consistent investor demand over the past 30 years for increased market access, increasing levels of global trade and the need for more efficient capital markets,” Mercer added. “We consider a full move to 24/7 spot FX trading a real possibility within the next five years, with Weekend FX representing a clear step forward in achieving this goal.”

In contrast to FX, equity markets in Europe are currently looking to reduce market hours following calls from traders for exchange groups to consider the impact of shorter market hours on issues such as diversity and the well-being of market participants. Responses to a recent consultation from the London Stock Exchange revealed that the industry is largely in favour of the move, although all exchanges across the region would have to implement the changes for the benefits to be fully realised. 

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A team of former LMAX Exchange employees have announced the launch of a new technology firm to tackle market fragmentation and data issues.

FinTech firm TransFICC aims to provide technology addressing Mifid regulation, fragmentation and data in the fixed income and derivatives markets.

The TransFICC development team claim to have significant technical expertise in trading derivative and fixed income products.

Toland, along with co-founders Judd Gaddie and Tom Mckee, also held senior positions at LMAX Exchange.

Its technology claims to enable coordinated timing between fragmented venues, scalability of market data, and the reporting required under Mifid II.

With Mifid regulation requiring transparency, proof of best execution, and market surveillance, banks are expected to update their technology.

Steve Toland, founder of TransFICC said the technology was formed in response to banks and the buy-side asking for solutions to these regulatory issues.

Toland said: “Complying with Mifid II regulation requires a robust technology infrastructure combined with high performance messaging.

“Our technology team has experience of developing exactly these types of products.”

Toland added: “The fixed income and derivative markets comprise over 120 venues. 

“TransFICC is developing fast, robust and scalable technology that can efficiently process significant surges in market data across these venues during volatile markets.”

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