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Mahi Products for Prop Trading

Executve Summary

Mahi provides a set of consistent $/M value-add techniques to making a tangible difference to a firm’s profitability, providing multiples of ROI relative to license costs.

Using a series of techniques that no competitor provides we help make your business more profitable.

We also:

  • Improve client trading experience for users who are not abusing your liquidity.
  • Provide tighter, more marketable spreads to clients, making client acquisition easier.
  • Introduce automations that make it cheaper to operate the company's business.

The Power of Compounding

In this Prop Trading competition scenario, we explore how applying Flow Imbalance (FI) and Liquidity Reduction (LR) techniques impacts the stage-wise graduation rates and final payouts. We'll explore these techniques later on, but for now we can observe the compounding effect of their impact.

By reducing the graduation rate at each stage from 15% to 12%, the number of final graduates is cut in half, and payouts decrease by 63%.

https://app.getguru.com/card/cdXa47Ai/Prop-Trading-The-Power-of-Compounding

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Performance Comparison

Aspect

Without FI + LR

With FI + LR

Impact

Graduation Rate per Stage

15%

12%

20% reduction in graduation rate per stage

Graduates by Stage 1

150,000

120,000

Reduction of 30,000 graduates

Graduates by Stage 2

22,500

14,400

Reduction of 8,100 graduates

Graduates by Stage 3

3,375

1,728

50% fewer graduates (1,647 fewer graduates by Stage 3)

Profit per Graduate

$5,500

$4,000

$1,500 lower profit per graduate

Firm Payout per Graduate

$4,400

$3,200

$1,200 lower payout per graduate

Total Firm Payout

$14,850,000

$5,529,600

Total payout decreased by over 63% ($9,320,400 reduction)

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Conclusion:

The payout is reduced from $14.85 million to $5.53 million, a decrease of over 63%, driven by the application of FI and LR techniques.

Where Does Mahi fit in?

Prop Trading Firm Ecosystem

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Why do I need MFX Compass?

I've got a bridge provider and aggregator, why do I need my own pricing engine?

  • Pricing: Compass forms it's own price, it doesn't aggregateMarket Data as Aggregators
      • Aggregation slows down the rate formation to the rate of the slowest LP
      • Aggregation internalises flow on someone else's rate
      • Aggregation naively uses crossed order books
      • Aggregation is choice at the wrong time
      • Aggregation results in loss of rate control. Skewing your own rate based on other LPs skew
      • Aggregation results in loss of spread control. Fixed markup on top of other LPs rates.
      • Aggregation doesn't understand the constituent LPs

=> In Summary Aggregation presents temptation to end user retail clients.

  • Predictive Skew: Using this we reduce payouts and reduce successful pass rates in challenges Skew Summary & FAQ
  • Benchmarking, News & Volatility Response: advanced protection, controlled in line with your mandate.
  • Advanced LP Analysis - Often there is no single best LP source in price construction and the best rate is formed from understanding the underlying LPs and the role each can provide. We will augment your existing data sources with our own market data and centralised predictivity trading signals.

Why do I need MFX Compass Execution?

Sending prices directly into a Trading Platform and letting that platform determine the prices used to fill a trade, results in a non optimal setup.

VWAP Fills

Some platforms will fill orders regardless of size using the TOB (Top Of Book) or BBO rate. Some won't use a VWAP fill even though we publish a full market data order book with depth.

Large Order Arbitrage

Where this is not being applied we have seen arbitrage manifest in large ticket size orders getting better spreads than small tickets. When users detect the rate is vulnerable like this they trade in large sizes. Sometimes resulting in the larger the order, the worse the initial inception spread.

Problems with Simplistic Demo/Simulated Environments

  • If you have a lot of coordinated trading or clients trading at the same time, artificially filling at the top of book would be a behaviour that would not be replicated in a realistic trading environment. Sometimes the same maker quote is manifest amongst multiple LP feeds. Often this results in liquidity mirages, it would only be executable once.
  • In real trading successive fills would be worse for the clients as the liquidity is consumed. Use Liquidity Reduction to provide a more realistic fill experience even in a demo environment.

With a pricing-only arrangement, we have limited influence over the fill process. Shifting to execution will enable us to:

    • Control the fill price with total precision.
    • Optimise liquidity conditions to suit the specific nature of your counterparties flow using our classifier. Reducing time to action and operational scaling of policing flow. You can scale your business without needing to scale the number of hires to police the business.
    • Apply Liquidity Reduction a judicious response to liquidity abuse with a boost of $5-10/M in FX. 15$/M in metals and CFD. $50/M in Crypto.
    • Consider brokering certain counterparties. Albeit we would try to monetise the flow without doing this first. Due to the additional costs, we'd do this as a last resort.
  • Avoids DDoS Attacks on down-stream fills
    • EAs have deconstructed MetaQuotes UI, bypass some order throttling protection logic and DDoS the MetaQuotes server and then latency arb it. MetaQuotes due to the increased resource consumption can fill on old quotes. Compass execution package inherently protects for this as we determine the fill and we're a separate server. Western Pips is an example of this kind of abusive tech. https://westernpips.pro/westernpips-private-7 and https://hftarbitrageplatform.com/en/ is another example.
    • This effect in the news
  • Latency in price distribution to fill price used in fills
    • If there's any latency in the distribution of quotes, network glitches or whatever, then stale quotes can be used to fill a trade. This is particularly relevant during news.

Automated Flow Classification

Tie system behaviour to the quality of the flow.

Improve trading conditions for flow that is knowingly not timing their entry (which makes marketable trading conditions better) and make it worse for liquidity abusers.

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  • This process is automated and so requires low staffing requirements as your business scales
  • Classification is tuneable in line with our client's mandate.
  • This process uses yield profiles or markouts. For an explainer please see here

Execution - https://app.getguru.com/card/Tj8Rkb6c/Execution-Rule-Overview

This is the rules engine that governs client order acceptance and trading conditions for a particular matching rule. In combination with automated flow classification this becomes very powerful. A fully automated feedback loop. Not something that alerts that there is a problem. Something that will also action the solution.

What are MFX Compass' Risk Management options?

Use classification to determine the subset of graduate flow that you should hedge.

LP Measures

Market Impact & Hedging

Systematic Internalisation (SI) Summary & FAQ

What is MFX Synapse?

Although MFX Compass is integrated with most third party bridge providers, MFX Synapse is MFX Compass with native connectivity.

Mahi MetaQuotes Bridge & Connectivity Solution

  • Better Value than Incumbent solutions with shorter contract lengths:
    • Avoid $/M costs of competitors and switch to a monthly fee.
    • Cheaper total cost of ownership relative build your own or third party bridge solutions e.g. FxCubic, OneZero, PrimeXM, Gold-i
  • Enhanced Execution Support & Client Experience
      • Counterparty + Expert Advisor (EA) classification. Tie classifications to risk management or execution decisions.
  • Faster + Native integration between Trading Platforms e.g. MT4/5 and our Compass product.
    • Less network hops for processing data
    • Front to back MD and Order workflow Mahi managed
    • Reduced number of vendors involved in troubleshooting
    • Policing by expectations & exceptions
      • Automated proactive capture & monitoring
    • Reduced time to action in troubleshooting
  • Reduced operational staff requirements
    • Everything has to have an automation strategy without loss of expression/capability
  • Predictive Performance Engineering
    • Low-latency, direct connectivity. OZ is known to be arbable via LMAX £1k/month feeds
    • Multi-region, guaranteed WAN messaging and position keeping system. Global or Regional Pricing?
    • Intra-region optimisation of
      • pricing & smart order routing
    • Predictive engineering techniques used throughout.
      • tick count engineering
      • predictivity and pricing throttle analysis on MetaQuote buffers to protect quote quality during news and highly volatile market states.

MetaQuotes specific benefits

    • Separate Open vs Close execution criteria.
      • People complain more against issues with closes.
    • Treat Margin Call / Stop Out orders differently than user initiated orders via Trigger based execution criteria.
    • MetaQuote Group execution criteria
      • Vary execution rules by region/regulation territory/group
    • Execution/Cancellation/Slippage controls are normally against the published price
      • Can do it against the price within MetaQuotes (can be different based on buffers/delays in MT4/5)
      • Can do it against the TP/SL price too of their order.

Mahi MetaQuotes Analytics Bridge - Using a manager account obtains trade and position related information so that Mahi can perform, counterparty analysis. It also analyses positions information and can feed Compass with server, group or lifetime counterparty information. More details here

Mahi MetaQuotes Execution Bridge - Using MetaQuotes Server API, this bridge is capable of feeding prices into MetaQuotes servers and interacting with client orders i.e. filling the order, brokering the order or rejecting the order. More details here

Mahi MetaQuotes Management Bridge - Using MetaQuotes manager API, this bridge helps run common business operation tasks on a fleet of MetaQuotes (MT4/MT5) servers. More details here

Cross Trading Platform Support

Diversified Platform Support

We provide support for most off the shelf trading platforms and also provide a quick path to integrate in-house proprietary trading platforms with our solutions.

  • MetaQuotes MT4/MT5
  • DX-Trade
  • C-Trader
  • Match-Trade

Mahi Trading & Analytics Consultancy Services

Trading Challenge ROI Assessment

We are able to evaluate changes in trading challenge based on direct historical trading from your existing client base and see how that impacts ROI.

Regulation

  • Recent regulator attention / reviews
  • Mahi already has a lot of experience operating in regulated environments. Can act as the experienced shepherd for these situations as the industry becomes more regulated e.g.
    • regional variation in pricing models / FI skew size
    • liquidity reduction => strong narrative + judicial

Simulations

Underpinning our entire approach is the ability to replay any pricing and trading scenario in simulated form. We can help refine our models, or hypothesise about how our system would behave with different trading configuration or logic. Simulations & Backtesting

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