Central limit order book
As active participants increasingly migrate to electronic execution of their FX option business, market makers are actively seeking a fully electronic wholesale marketplace where they are able to transfer risk efficiently and cheaply.
Legacy voice execution channels struggle to meet tougher regulatory requirements and continue to remain increasingly inefficient and extremely costly to use.
Digital Vega is working with a broad group of professional traders to deliver a unique new volatility-based FX option trading venue.
Given recent significant increase in regulatory costs and bloated execution fees, Digital Vega will introduce a unique new liquidity driven maker-taker brokerage model. For the first time, participants will earn brokerage in return for posting executable liquidity into the platform. Based on balance of interest in the market, this fee structure will move up or down to better attract either more market makers or takers. This new brokerage model will aim to reduce active participants transaction costs by 50%-75%.
Using an intuitive new User Interface or dedicated FIX API, participants will be able to interact seamlessly with each other across standard tenors or specific structures/dates using a multi-layered matching engine and harmonic limit management tools. Using DV’s holistic limit engine, users will have the flexibility to trade bilaterally, via prime broker(s) of via LCH clearing where relevant.
Trading of specific interests will electronically emulate current “negotiation and auction” protocols to achieve best price with all the benefits of a full audit trail, regulatory reporting and detailed market data.
Where required, DV will also provide a direct RFQ network to support block trading between participants.
This new platform is targeted for initial launch late Q4 2019 or early Q1 2020.