Commercial Definitions

There's a huge amount of discretionary value via Compass via features that are harder to put a dollar value on e.g. how control over your spreads can attract more business. Here's an example of some forms of benefits the product brings that are less discretionary that can help rationalise when a business is in the right shape for requiring a Compass License.

Using the below as a beer-mat cost / value estimation, we feel it draws an illustrative picture. By all means, choose your own numbers here.

Our clients see us as an extended part of their team. Externally validated, plugged into multiple other similar teams facing off against a larger surface area of learnings in the FX + Crypto + CFD space.

Compass

Trading PnL.

This is PnL that Compass has produced via direct management of the risk using its flow classifier and advanced predictive hedging strategies. Most CFD brokers publish something along the lines of "74% of retail traders lose money". We typically find that a typical book contains 10% of flow that would be suitable for monetisation via a Compass risk management strategy. We are assuming a $10/M return on this flow

Global/Channel Liquidity Reduction PnL (LR PnL).

This is protection against lots of orders arriving at the same time pushing the market, particularly in sensitive instruments or illiquid times of day. Based on collusion / EAs / Signals, price is made worse during such coordinated trading.

Note, this and the following LR technique has been judged as judicious price responses by regulators. We typically target 5-10$/M a value add

Counterparty Liquidity Reduction PnL (LR PnL).

Some clients machine gun orders through. Instead of sending in a single order representing all trade volume they want to get done in a short interval, they split that order into a series of small orders. The hope from the client is that they get filled at the top of book price vs the full volume weighted price. Liquidity reduction keeps track of a window of volume that the client has done and instead fills orders at a fair price. We typically target 5-10$/M a value add

External Sweep detection (LR PNL)

Protects against dealing not full. Signal based liquidity reduction based on the detection of sweeps from elsewhere.

Learn more about Liquidity Reduction here

Classifier PnL

Savings against bad flow entering the b-book. Reduced time to action on making the switch to brokering or compass risk management.

Pricing Predictivity Fill Price Improvement

We produce predictive pricing models beyond a single LP or an aggregator. Pricing Predictivity

These trading signals and predictors are continually refined. The implementation details are proprietary and a huge product differentiator for us. Their impact is simple to describe, but application ideas are hard to replicate.

Execution Cost Savings

Where portfolios would be alternatively managed via STPing the risk to market. We have produced an execution cost saving representing the reduced trading commissions, bridge fees that would have occurred if the flow was brokered.

Staff Operational costs

We'd argue that due to automation we help to deliver efficiencies in the number of staff required to run the business.

Staff IT DEVELOPMENT TEAM costs

Using the below as complete beer-mat cost estimation, we feel it draws an illustrative picture. By all means, choose your own numbers here.

Quants average salary: $260k (click the link for the source)

Assuming 1 quant ($260K), 1 lead developer ($180K), 2 senior developers ($150K), 2 junior developers ($100K), 6 operational staff ($100K) (3 people over 3, 8 hour shifts to cover 24/5 support)

1.5 multiplier to accommodate additional taxes, office, training and ancillary costs.

(260 * 1 + 180 * 1 + 150 * 2 + 100 * 2 + 100 * 6) * 1.5 = $2.44M per year.

Training Budgets

We work in a world where staff retention can be hard. Acquiring and training new staff can be a large portion of our day-to-day work. We help with not only our Compass Product Training and Echo Product Training but provide a constant pool of knowledge on how your business is operating.

Synapse Connectivity

Many competing bridge providers have defocused retail. They have introduced minimum monthly fees to their offering. They provide the plumbing to running a trading business but that is where their involvement stops. They are focused on output and not outcomes.

Bridge Provider Costs

We'll add value by providing a cost saving relative to your current bridge provider cost.

We'll also want to demonstrate our commitment to being world-class at connectivity

A lot of customers have a single bridge provider, which means they have a single record of truth for things like MD. This doesn't help diagnose when the bridge provider themselves are the problem.

Learn more about Synapse

Build vs Buy

Build vs Buy

Example Value Add Calculation

Using the below as complete beer-mat cost estimation, we feel it draws an illustrative picture. By all means, choose your own numbers here.

Compass Only

Monthly Volume = 3.5B * 4.25 = 14.5B or 14,577.5M per month

Compass Book Monthly Volume at 10% = 1.5B

Compass Monthly Trading PnL: $15K at $10/M

LR PnL (Counterparty & Global): $148K at $10/M

B-Book Classifier Savings: $20k

Predictive Pricing Savings: $73K at $5/M

Execution Cost Savings: $4K

Total Compass Attributable: $260K

Compass & Synapse

Total Compass Attributable: $260K

Bridge Provider License Fee Saving: $40-150k