Richard Elston, Group Head of Institutional Sales at the company CMC Markets, discusses the highlights of recent technical developments and shows what this means for the company and its growing institutional client base

The 32-year-old brokerage has long been recognized as a tech innovator, but developments over the past 12 months CMC Markets implementing wholesale infrastructure upgrades that allow them to become a true contender for institutional pricing and liquidity. Under CMC Markets Connect, the broker, is expanding its role as a non-bank liquidity provider, allowing it to not only draw on established relationships with prime brokers, but also to utilize a comprehensive range of pricing channels alongside its internal flow, creating a truly new pool of price-consistent liquidity with the ability to list in at or above market depth.

Looking back at the start of 2021, you launched a new institutional brand – what was the motivation behind that?

Richard Elston, CMC Markets Connect

Richard Elston: Despite the company’s success over the past three decades, we realized that we needed to better differentiate between institutional and retail product offerings. To solve this, we launched CMC Markets Connect, which allowed us to create a clear, separate identity for our institutional operations and provide a better reference point for what we wanted to provide in terms of pricing and as a true liquidity provider to other banks and brokers. While many claim to offer this service, all too often it is simply a case of recycling other people’s liquidity and we needed to make it clear that this was not an approach we would take.

What is at the heart of the new proposal?

Richard Elston: Our migration of the entire primary business and risk infrastructure to LD4 the data center is probably the most impressive point here. Historically, we have had some operations located in-house LD4while others ran on CMC sites. Moving to a liquidity provider meant speeding up processes and eliminating latency was absolutely essential. To this extent, even the back-office reservation system was moved to a shared data center, while we also upgraded our “transport layer” to ensure performance optimization between the various components. Ultimately, if you are not removing all potential delays from the system, the counterparties are being offered an advantage.

as a company CMC is well known for its own development work. Was this process different?

Richard Elston: Although internal development teams took the lead here, we certainly drew on third-party support where it could bring real value. To this extent, we have established a technology partnership with Quod Financial, which has provided us with better price discovery and price ladder construction results. While it improved our own security capabilities FXa number of internal developments also improved our index and commodity contracts for difference (CFDs) prices.

With the redesigned infrastructure, how has this affected the product offering?

Richard Elston: The sheer scale of the change process means we’ve been able to significantly improve our institutional product offering over the course of 2021 – with more to come this year.

First, we managed to launch a dedicated channel for registration CMC Markets Connect clients, something that has served to streamline processes and subsequently speed up the time it takes to get new institutional counterparties up and running and into our system. Again, this was about adopting an institutional approach, as opposed to simply trying to repurpose tools used elsewhere in the business.

After that part of the process was resolved, it paved the way for us to get Spot up and running again FX. It was part of a wider one CMC Product suite markets historically, however, have not been necessary for the retail side of the business. However, we have re-offered this asset class, which is pretty much the industry standard for providing wholesale liquidity, although of course we continue to provide access to a wide range of instruments through CFDswith too.

We have also redesigned this offering for our institutional audience with a new platform developed exclusively for CMC Markets Connect clients giving them access to this range of over 12,000 instruments – and counting.

Crucially, our architecture allowed for the removal of those modules available to retailers that were deemed redundant for institutions. We now offer this cohort direct access to the functionality they need, recognizing that they will use multiple sources of information to enable them to develop business strategies. We were also able to release a new optimized application programming interface (API) connecting institutional clients to ours LD4 servers, including a number of new order types that have historically not been supported. Again, there may be a degree of surprise at how undemanding many platforms are here, but we now support rest commands and also offer more complex features such as the ability to do rollovers not only automatically, but also manually. if needed – something rarely seen outside of the prime broker community.

Does this upper end of the institutional market expect more flexibility from its liquidity providers?

Richard Elston: This is indeed very much the case, and something we have anticipated with the infrastructure overhaul, plus the new platform and API connection. As mentioned earlier, we’ve included the ability to do manual conversions and added multi-currency accounts and multi-currency ledgers. These attributes combine to allow clients to manage their own exposures, rather than being limited only by the rules we set, and will soon be augmented by a state-of-the-art surrender process that is fully automated and integrated into all our systems.

What else are your institutional clients looking for?

Richard Elston: They want a seamless service that works on their terms. To this extent, we have integrated with a number of major bridges, electronic communication networks (ECNs) and other fintech providers to ensure we are able to work with the client.

While the number of potential connection partners is significant, this is an iterative process and our internal development teams are working to continually increase this number. At the time of writing this article, we have established connections with a total of five bridge providers and ECNand we expect this number to double over the next six to 12 months, ensuring that we are considered a real player when it comes to global FX market ecosystem.

And where will the product go next?

Richard Elston: With the modernization of the institutional back-end now complete, our main focus is to continue expanding the range of tools we offer to counterparties. Ultimately, we want to be a one-stop shop for all liquidity needs, and we understand that this approach brings great value to clients. We’ve addressed this with a number of initiatives, from streamlining reporting and managing margin calls to expanding the tradable world. This includes increasing the range of investment-grade assets offered, such as exchange-traded instruments and cash equities, along with the addition of more innovative products such as OTC carbon credit derivatives, which we added in late 2021.

The market continues to evolve, but as we have repeatedly seen legacy players change their strategies and product offerings over the past decade, this presents an ideal opportunity for fintech innovators like us to step in and deliver the solutions needed.

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