Global or Regional Pricing?
Some Brokers offer a single rate from a single regional location. These places could be LD4, NY4 etc
There are advantages to this model in that it is simple to setup and easier to run.
client experience
If there is a large amount of clients trading on your platform from alternate regions they will notice the delays in filling their orders. This will be in the realm of human and EA detection. This will give a natural advantage to local regional Trading Platform providers.
Transatlantic Delay
There are fundamental limits to data transfer speeds between regions at 58.95ms the https://en.wikipedia.org/wiki/Hibernia_Express is the lowest latency connection currently.
In a single region approach you form a price in one region and relay that to the other.
Some of the LPs used in forming that price may actually originate from alternate regions.
Say Broker X is forming a price in LDN but sourcing quotes from an NY originating LP.
When servicing a client in NY. The data travels from the NY based LP out to LDN over the Hibernian Express. A price is formed in LDN and shipped back out over the Hibernian Express back out to NY.
That NY LP themselves could be forming prices from LDN based LPs/Markets. The problem can be bad for pricing.
This can exaggerate what we already know are some of the problems with Aggregators
- moving at the pace of the slowest LP
- recycling liquidity (cross regional liquidity also).
Smart Order Routing
Consider brokering an order. The Fill ratio of an LP is different depending on which region that LP is in and the order is attempted.
If an NY client send an order to broker's LDN server and the broker forwards that order on to an NY LP. Two Hibernian Express round trips are made and the fill ratio will drop.
Predictivity
At Mahi, we're big believers in Predictivity. We form our own pricing and as part of that we believe that you need to form regional pricing as market data and information differs between regions. An LP may be less predictive in one region than another.
Smart Order Routing
When it comes to brokering flow you want to construct pools of LPs that represent the best execution for your local region.
Compass
Compass supports multiple regions and global synchronisation of risk. Overcoming numerous challenges of guaranteed messages across the WAN and within region optimisation.
VALUE
Sometimes it can be hard to know when to scale up to a multi-region setup.
We've developed a Value-Add simulation which helps to break out some of the tangible value-adds that the Compass system provides and help frame ROI discussions in doing so.
Please contact us to find out more.
