Unveiling the Future of Retail Liquidity: Industry Leaders During FMLS:23 – TradingView News

The annual Finance Magnates London Summit 2023 featured a panel of experts who discussed the current liquidity landscape for retail brokers. The panel covered topics around access to deeper liquidity pools, innovations in liquidity operations, competition in the prime market and whether banks are opening up to work with retailers.

Moderated by Hormoz Faryar, Managing Director of Institutional at ATFX, the panel featured industry experts including Phillip Spurgeon, Head of B2Prime's UK office, Andreas Kapsos, CEO of Match-Prime Liquidity, and Ben Robson, Head from Institutional EFX at Swiss Finance Corporation and Alexei Jiltsov, co-founder of Tradefeedr.

Impact of geopolitical events

Phillip Spurgeon

The panel began with a discussion on the impact of geopolitical events, such as the escalation between Israel and Gaza in October 2023. Phillip Spurgeon pointed to defensive pricing by market makers and the widening of spreads, particularly in commodities such as gold, during geopolitical tensions.

“What we notice with all geopolitical tensions is that they always lead to uncertainty in the markets. As a company, we saw market makers pricing defensively, we noticed spreads widening, particularly in commodities, particularly in gold as well,” Spurgeon said. Andreas Kapsos

This opinion was echoed by Andreas Kapsos, who highlighted how such events lead to protective liquidity strategies and trigger arbitrage opportunities. “It happens very often that we have events like this during the course of the financial year. Obviously, this one outperforms the rest of the year. The specific event occurred on Saturday, so the market had some time to react during the opening.”

Internalization with A-Book and B-Book models

A significant part of the discussion revolved around the A-Book and B-Book models in retail. Spurgeon emphasized the importance of a hybrid model that balances risk management and choosing the right liquidity provider. Kapsos shared his perspective on regional differences and noted the varying success of B-Book strategies in different markets.

Alexei Jiltsov pointed out that lower volatility in 2023 compared to 2022 implies a more directional market, impacting both A-Book and B-Book strategies. He emphasized the importance of customer management in liquidity strategies. Alexei Jiltsov

“First, the market could be more directional and potentially have less uncertainty. Secondly, there is a possibility that retailers will occasionally make accurate predictions,” Jiltsov explained. “However, this depends heavily on the customer profile. “In cases where trading is very directional and focused on just one or two assets, there is a higher risk of getting caught, especially if those assets have a strong consensus.”Ben Robson

Ben Robson favored the A-Book flow and emphasized the influence of factors such as balance sheet strength, customer base and leverage on these models.

“While B-Book has its advantages, I agree with Phil that the balance sheet plays an important role. The location of the brokerage company is also crucial. Customer base as well as economies of scale and leverage are important factors,” Robson added.

Development of retail trading platforms

The discussion then shifted to trading platforms, with the focus on the dominance of MT4/MT5. Andreas Kapsos pointed out the increasing demand for alternative platforms and technology solutions, especially in the wake of MetaQuotes' decision to white labels.

The changing dynamics surrounding trading platforms have a direct impact on liquidity and broker strategies. Kapsos noted that more and more startup brokers who are now exploring alternatives to MT4/MT5 are considering A-Book strategies from the start. This is a departure from the traditional approach of focusing on B-Book models first.

The panel concluded with a forward-looking perspective on liquidity management, recognizing the complexity of influencing factors, from geopolitical events to technological advances.

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