“Over the last two years we’ve observed that there is a great need for an electronic platform that supports the trading of large blocks of foreign exchange (FX),” says Vijay Kedia, president and CEO, FlexTrade. FX-trading is still conducted over the telephone, which makes it prone to information leakage, says Kedia. “Today, if you want to get rid of a large block of FX, you will soon show your hand to other market participants,” he explains.
FlexTrade’s new block-FX trading platform, MilanFX, is designed to provide a level playing field to buy- and sell-side trading institutions. “It allows both the buy- and sell-sides to post orders anonymously,” explains Kedia. The only participants who are allowed to see each other’s hands are the prime brokers.
Lots of buy-side firms often want to trade large blocks of FX and there is a big pool of liquidity among the buy-side itself, not just among the sell-side, according to Kedia. Nonetheless, it is by combining the two on one platform that a big pool of liquidity is created.
MilanFX computes the reference price based on indicated feeds coming from six or more prime brokers, says Kedia. “For the last two years or so we’ve been selling our algorithmic trading platform to both the buy- and sell-sides. It’s been well-received; lots of firms use it actively,” says Kedia. FlexTrade’s FlexFX product is currently used by twenty-five banks.
There are multiple dark pools of liquidity in the equities space and thousands of trading instruments. Equities offer more transparency than FX because you can look at their exchange-traded prices, according to Kedia. “It’s natural that the same concept for trading equities should work for trading FX. Our success in FX has been influenced by our equities experience,” he says.