Liquidity Distribution Workflows
Distribution
By this we mean the distribution and tailoring of prices and liquidity to clients.
Why is this important?
This is your gatekeeper. Some of the connecitivity infrastructure will be handled for you by your connectivity provider, where this is not MahiFX. As you grow your business you may want to move some of those in-flows directly into Compass. It gives you fine grained control, additional protections and tailored liquidity to each of your clients. This part of the product can be managed directly via MahiFX or in combination with yourselves. This is governed by the levels of your in-house expertise and detail with which you would like to involve yourselves in flow management.
Channels
Distributions channels are the streaming mechanism for publishing prices from compass to clients through FIX connections. They enable customisation of liquidity for any defined group of clients. The channel explorer is a front end configuration screen where feed aggregation, visible quantities and price update frequencies can be tailored.
Distribution starts with a Channel which is a specification of price distribution characteristics and order acceptance criteria. Maybe a single Channel is fine for one particular set of retail flow. You might create another for a large institutional client. Using this channel, you can send to the client a combination of:
- Internal prices/LP pools/both
- Control this pool formation by instrument/timezone etc.
- Vary the quantity visible
- Intelligent throttles
Assign the channel to a:
- Markup profile
- Liquidity refresh profile
- Risk control profile
Distribution Channel - Overview
Liquidity Refresh Profiles
Liquidity throttle profiles control the rate at which liquidity is removed from the pricing stack ensuring fair spread is crossed for clients wanting to clip the TOB rate.
This is used to make the rate worse for the client once they have consumed beyond a normal level of liquidity. In the distibution channels, configuration allows you to apply LR across the pricing distributed from that specific channel.
Markup Profiles
The markup profiles allow fees to be applied to principal prices or Liquidity Providers pool prices according to instrument or timezone defined by US$/million traded.
- Principal fees include any trades that were made in house from market making.
- Agency fees include where trades have been brokered.
Risk Control Profile
Risk control profiles define the subset of flow managed by the channel. Risk control profiles are defined in distribution.clientConnections.fix.fixClientConnection and can be made up of a combination of the following:
- Counterparties
- Instruments
- Timezones
- Risk increasing/decreasing
Utilising similar firewall protection to our pricing models. Protection is applied in both places. When a firewall trips, if the option to broker liquidity is applied to the channel all orders will be brokered until the firewall is reset. If no brokered workflows are enabled then the orders will be rejected at source. This may result in them being rerouted by the connectivity provider.
Client Connections
Map connections to Channels. Provide our own internal FIX API support for on-boarding clients directly, or utilise Mahi's custom adapters to various platforms.
Wide Spread Suppression
Wide spread suppression can be very important as it can impact your pricing SLAs that recipients of your price feed may assess you upon. Particularly for distribution to retail clients that have resting orders, a severely wide spread may result in stop orders being triggered. In this case it may be better to bound the spread's with which you can publish a price.
The Wide Spread Suppression config allows tailoring of the systems behaviour when wide spreads are generated, for example around unexpected market behaviour. The spreads clients receive can also be capped or made indicative. This is configured as a multiplier of the distribution market’s base spread. The inputted value represents the maximum the front of stack spread can be before pricing is suppressed.