Buy-side traders have welcomed the Hong Kong launch of LMAX Exchange, a UK-based platform that aggregates foreign-exchange liquidity, saying it will help smaller funds access flows.
As a broker licensed by the Securities and Futures Commission, LMAX Hong Kong offers institutional and professional firm-limit order FX liquidity in more than 60 currency pairs. Scott Moffat, chief operating officer of LMAX Exchange, is heading the Hong Kong operation as an executive director.
The platform is likely to be suitable for hedge funds, asset management boutiques and broker-dealers, said the Asia head of trading at a large international fund house.
He said his firm would not use it because it already has access to the best FX prices and liquidity, thanks to its counterparty relationships and high trading volumes.
But he saw LMAX gaining traction in the region among smaller firms, as it allowed them to access attractive FX prices regardless of their trading volumes or credit rating. Moreover, few platforms are looking to offer flows aggregation using a similar approach, he added.
Philip York, a Hong Kong-based veteran trader at advisory firm Alt 224, was also positive on LMAX’s move, but said it would take some time for the platform to build a cost-effective business in the region.
“The FX market is very big in aggregate, but it’s so fragmented that if you try to put a large block through a single bank you effectively have to pay for it to be spread around the market,” said York. “So the potential to aggregate FX participants at low cost is a welcome alternative."
He added: “The [currency-trading] volume in this region is very small, but they are doing it to provide a complete global service. So I don’t see it as being cost-effective initially, but they will get there.
“Asian volume at this point is a very small part of LMAX’s turnover, but you have to have an office here if you want to get traction.”
The main competitors to LMAX are the big brokers and also electronic platforms providing access to liquidity feeds, such as Currenex, 360T and Hotspot FX. LMAX could in theory offer a link to such feeds, added York, but currently they are also rivals.
LMAX’s Hong Kong launch comes soon after its addition of a new matching engine in Tokyo last month, allowing it to offer the same low-latency execution of under 4 milliseconds in Asia Pacific as it does elsewhere.