360T, a foreign exchange trading platform and technology provider, and Quantitative Brokers, a provider of algorithms and analytics, recently announced that QB’s FX algos will be available via 360T.
Traders Magazine caught up with Matt O’Hara, CEO of 360T Americas, and David Kalita, QB CEO, at last week’s TradeTech FX USA in Miami to learn more.
Briefly discuss the value-add of the 360T-QB partnership?
David Kalita: This partnership unlocks additional value for FX market participants by enabling them to access advanced execution algos from an independent source via a market-leading trading platform where pricing from different counterparties can be put into competition to ensure best execution.
If you look at FX versus other asset classes, what’s unique is that you’re often trading on a disclosed basis against other counterparties or pools of liquidity and liquidity providers (LPs) are then looking to try and monetize that flow.
And so a common mistake people make is to put a very large number of banks in competition on a trade. You’ll get an excellent execution on that order, but then that LP will go and look at the profit from that trade and see that they basically earned nothing, or more likely lost, and then they’ll widen their pricing bands out over time. The result is that while you might experience tight pricing in the short-run, you’re going to lose out in the long-run by not having sustainable, quality liquidity.
One of the factors which make QB’s algos unique is that they take this into account. So in addition to ensuring optimal execution for the buy-side counterparty, we’re also looking at bank profitability, which is key to making sure that the liquidity pool remains sustainable.
What does this partnership add to 360T’s current offering, and why are you adding it?
Matt O’Hara: We developed this partnership in response to customer demand. QB has a strong pedigree in listed derivatives, and especially amongst large institutional buy-side firms. 360T has been growing rapidly and successfully partnering with many of these firms, where we see increasing demand for access to independent third-party algos alongside bank provided ones. So this collaboration aligns with our innovation and growth strategy, supporting the buy side’s increasing need for automation and diverse workflow optimization tools.
How does this announcement tie into the 2024 prediction — which Matt revisited in his Feb. 10 ‘From predictions to progress’ keynote at TradeTech — that buy-side firms will consider independent FX algos to complement their existing bank offerings?
Matt: At TradeTech FX USA last year we predicted a growing interest in third-party algo adoption, and 78% of surveyed buy-side firms agreed. The partnership between QB and 360T—where QB provides the algo logic and 360T supports the distribution—serves as clear evidence that this prediction has proven accurate and that clients are actively seeking to adopt this technology.
David: For context, FX algos have been around many years now. The space has grown quite a bit, but at the same time I think some clients are experiencing pain points that are not being solved by the current offerings in the market.
And that’s why clients have been engaging with us more in FX. We can understand their flow, customise and tailor the algos, and also innovate and adapt and grow with new strategies. We’re also rolling out new changes roughly every six weeks based on customer demand and our own research, so we’re able to be nimbler and more responsive than some of the other providers in this marketplace.
At the conference it was mentioned that three broad features of the FX market are scale, complexity, and rapid evolution. How does the 360T-QB news tie into this?
David: Regarding the complexity point, if you’re a buy-side firm, best execution is a big challenge. Just think about how fragmented the market is across all the different ECNs and the different pools of bank liquidity from the different banks – having to technologically connect to all those, understand all the different rule books, navigate market conditions, and manage all those relationships is daunting. And there’s also the matter of bank profitability.
Managing all that and abstracting the complexity from the end user is our specialty and we do it very well, enabling them to focus on the tougher parts of the workflow that are their specialty, like generating alpha, managing portfolios and dealing with their clients.
Matt: In terms of scale, 360T is a very large global business. We support over 2,900 buy-side firms, and within this segment institutional clients have been a real focus area for us and form a strategic pillar of our growth. We are also connected to over 200 liquidity providers globally, providing and distributing FX pricing. And we operate multiple execution platforms, including an award-winning Execution Management System (EMS) and our own in-house ECN, 360TGTX.
What this partnership does, by bringing together the capabilities of QB and 360T, is deliver synergies that scale very quickly across these different client segments and execution channels globally.
