About the Client
The client is a CFTC-registered IB and swap firm specializing in FX options for asset managers, family offices, hedge funds, regional banks, and proprietary desks.
The client used to only offer customers voice trading, with employees having to book all deals in the back office manually. So the client decided to take the business to the next level by getting a properly regulated electronic FX options trading platform—a CFTC-registered swap execution facility (SEF).
The electronic trading system would upgrade the client’s current trading practices since it displays liquidity and reflects traders’ current interests. The client also plans on introducing this system to lower the barrier to entry for traders, thus attracting more customers. These upgrades should increase trading activity and liquidity influx.
This solution will also give the client’s traders another channel for sending orders in addition to voice trading. Each trader can choose their preferred way to strike deals.
The client requested a demo of DXtrade, and after conducting a competitive analysis, decided to get a custom build of our solution tailored to their needs.
The solution consists of four core components:
- Trading terminal
- Administrative UI
- Matching engine
- Order management system
We designed the trading terminal to be flexible, so traders can adjust widgets, create multiple workspaces, and reorganize them. Traders can also detach widgets and workspaces from the main window to facilitate a multi-monitor setup.
Here are some of the custom widgets we developed for the client:
- Options Expiry Tool
This widget helps traders make quick and informed decisions about their options. It alerts traders about soon-to-be-expired options, so they can choose whether they’d like to execute them or let them expire. The widget also provides an option for setting automatic expiration.
- Price Quality Filter
This filter determines how to price options and what hedge-price fields are required.
- Off The Run Widget
This widget provides a graphic representation of current traders’ interests to identify the most liquid strikes or tenors at the moment.
This UI allows client administrators to manage user accounts, currencies, commission plans, and trading calendars.
We equipped the client’s trading platform with a matching engine based on our solution—DXmatch. The matching engine pairs buy and sell orders to execute trades. It receives orders and produces market data (Level 2/Level 3 order books, top-of-the-book quotes, OHLC summaries), order updates (fills, rejections, etc.), and trades.
Order Management System
The delivered order management system’s purpose is real-time order and account data processing. It supports various pricing approaches, order types and groups, and trade restrictions.
The client offers trading options and strategies, including at-the-money straddles and custom strategies with vanilla options and hedging legs. The trading platform supports other standard strategies if the client introduces them. They can be added manually through an advanced order entry form.
The client’s UIs are dense with financial data. So we wanted to distribute them wisely, highlighting the most important information to be tackled first. We also delivered on the client’s UX requirements for keyboard navigation, autocompletion of some attributes, and main scenario optimization.
Aside from creating the trading platform’s 4 main components, we made sure the solution would pass regulatory requirements.
Reporting and Compliance
The client required the electronic trading platform to be a swap execution facility regulated by the CFTC, so we worked together toward this goal. Our main challenge was making this platform resilient to third-party penetration testing required for regulator approval. We also cooperated on registering the platform as an SEF and developed reporting for the CFTC.
Finally, the solution won’t operate as a stand-alone service. To this end, we ensured it integrated smoothly with the client’s back office.
Regarding integrations, we organized a trade flow between the electronic trading platform and the client’s existing back office. The client also asked us to provide the back office with additional features and further maintenance and support.
We also provided integrations with a market data provider and a market surveillance tool.
The client received a CFTC-regulated swap execution facility tailored specifically to their requirements. We equipped the platform with a client-facing trading UI, an administrative UI, a matching engine, and an order management system. We cooperated with the client on reporting for regulators. Our platform then succeeded in penetration testing, thus receiving approval as an SEF by the CFTC.
Finally, we equipped the client’s back office with additional features and integrated them with their new trading platform. Further integrations featured a market surveillance tool and market data provider.
We continue providing maintenance and support to the client’s platform and back office.