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Interview with Tom Higgins: It's all about liquidity

The lifeblood of the electronic financial markets is liquidity. In this episode of Off The Record, Andrew Saks speaks to Fintech expert Tom Higgins, CEO of Gold-i, about the importance of liquidity and the way forward for financial institutions, brokers and traders.

A-Book vs B-Book vs hybrid - how are liquidity models evolving?

"If you look at the A-Book / B-Book model, where A-Book is fully traded in the market, and B-Book is warehoused entirely, most brokers are hybrid model now. If they only have a license for A-Book, they will only do A-Book because that's all they can do. If they have a license to carry some risk themselves, they will tend to do a hybrid model, but it's pretty complex to manage. 

We've got a whole piece of software, Visual Edge, that helps brokers manage their risk. It's not just a matter of small traders going to the B-Book and big traders going to the market. Small traders who follow professionals effectively look like professionals because they follow what the professionals are doing. So because of that, the liquidity that you have coming in is crucial."

Has liquidity access got easier?

"Because it's impossible to get access to a Prime Broker, most brokerages have access to liquidity through a Prime of Prime (PoP) or Prime of Prime look-a-likes. To me, a PoP model is where you deposit your funds with that entity, and you get access to multiple liquidity sources, but it's all fronted by that one entity. 

This model makes it easy for a retail broker who wants access to liquidity for their thousands of end clients. I will sound like an older person, but brokers these days don't know how lucky they are! The PoP model allows them to pick multiple liquidity sources to ensure they have backup and good asset coverage - it's much more straightforward. Occasionally you get new entrants that need to be integrated, but most have been done now, so you can pick what you like and turn them on. If you have a different set of customers that need additional liquidity, you can just add more to serve that need."

How is liquidity distribution evolving?

"We have a product called MatrixNET, which is a partnership with LP's to distribute their liquidity through our Matrix liquidity management solution. We've now got about twelve MatrixNET liquidity provider customers, so there are a rising number of distributors to answer the question. One main reason for the rise is that it's much easier to access the technology to become an LP because it was costly in the past. Now brokers don't have to go to a bank, and non-bank liquidity has become very popular." 

Outdated banking systems vs NASA - how are they linked? 

"When thinking about the outdated banking system, it's similar to looking into space. NASA technology used to be based upon really, really old things that had to have been proven. Technology in the shuttle was based on old stuff, and what SpaceX has done is come along and said, 'It's ok to fail - as long as you don't kill people'. So they send rockets up, which will blow up, and they learn from it. Then they send another one up, which will blow up too, and they will learn from that. Fast forward a year, they will have achieved what NASA would take 10 years to complete. Yes, they wouldn't have blown any shuttles up, but it would have taken them ten years or so to learn. Therefore, I would argue it's much more expensive actually to not blow stuff up! That's the similarity between the banking system and NASA; they are both terrified of change." 

Find out more about Gold-i's MT4 Bridge & MT5 Gateway and Matrix multi-asset liquidity aggregator. 

If you want the most competitively priced, robust and reliable liquidity management technology on the market get in touch with us today.

About the author

Gold-i

Gold-i

Gold-i is a global market leader in trading technology, helping hundreds of multi-asset brokers to transform their trading operations with robust liquidity management solutions, award-winning MetaTrader Plug-ins, business intelligence tools and all with the best support in the industry. Gold-i has won over 20 trade awards in recognition of its innovative products, commercial success and future potential, including a prestigious Queen’s Award for Enterprise 2014. Has been recognised as one of the most influential Fintechs in 2018 and 2019.