360TGTX to Require LP Code Compliance

Deutsche Börse’s 360TGTX has announced that effective 1 October 2022, only signatories to the latest version of the FX Global Code, or LPs offering firm liquidity, will be able to make prices on the anonymous ECN.

The new rules will apply across anonymous spot and NDF trading for both full amount and sweepable liquidity. The platform is the second to make such a formal move – in July, CboeFX announced only Code-compliant LPs would be able to price on its full amount streams from 1 August.

The latest update to the Code was published in July 2021, with the Global Foreign Exchange Committee setting an unofficial deadline of one year for compliance with the changes, in the platform world very much around disclosure and last look hold times. That deadline has now passed and while the majority of LPs have restated their commitment to the Code, there are several firms yet to do so.

“We have made this decision because we believe that it will further enhance the 360TGTX trading ecosystem and provide a better experience for all users of the platform.” says Simon Jones, Chief Growth Officer at 360T. “We are strong supporters of the Code at 360T and customers of our anonymous pool have been able to select a Code-compliant pool since we launched Version 2:0. With the one-year anniversary of the updated Code passing, the direction of travel has become clear. The vast majority of our Makers are now code compliant and increasingly our Takers are becoming interested in the quality of the liquidity they consume.

“It therefore made sense to act for the collective in making this a requirement of participation,” he adds. “Our anonymous business, by its very nature, creates a gap in information for participants – this new requirement helps fill that gap.”

With Takers able to select Code-only liquidity for some time, Jones says that 360T has been able to assess the likely impact on liquidity on GTX, adding that it has been positive. At worst it will be neutral in the short term, and over time it will improve further,” he says.

Although Code-compliant liquidity has been available on several platforms for some time now, 360GTX becoming the second to ingrain it in in the platform rules, heightens the pressure on those LPs yet to re-attest to the updated best practice guidelines. For LPs, Jones sees two potential outcomes. “Firstly, either the last of our non-Code compliant LPs will adjust their business model and attest, ideally before our deadline, serving to improve the overall experience for customers,” he suggests. “Or those who don’t see these changes as for the greater good will drop away from our anonymous business.

“Secondly the LPs that have attested can trust that they are operating in an environment where the other LPs are operating to the same standard,” he continues. “Mixing LPs, where one is operating to a different standard is unfair on those who have made the move to embrace the new order of things. We think this change is the best move for all.”

360T says that the change will not be extended to the disclosed or semi-disclosed mechanisms operated by the firm. ““It is important that Takers are able to choose a specific LP mix, the reasons for selecting an LP can go beyond Code compliance,” Jones points out. “In a disclosed or semi-disclosed mechanism, there is the opportunity for dialogue. In our anonymous business, we become the intermediary through whom all such discussions go and so our role is more nuanced. We have to make decisions in the best interest of the ecosystem.

“We have no desire to alter known relationships – disclosed or semi-disclosed” he stresses. “As a heavily regulated institution who has attested to the Code, we are constantly surveying activity on the platform but the decision who a customer trades with on a disclosed basis, will remain theirs.”

The move by another anonymous trading environment to establish a level playing field for LPs can only be a positive for the FX industry more generally and it ratchets up the pressure on those LPs slow – or reluctant – to adopt industry-agreed best practices. The FX industry has already seen some bold moves through the adoption of shorter response time thresholds, the commitment to zero additional hold time and, of which this is the latest example, Code-compliant pools.

“It is important that Makers in an anonymous pool can be confident they are operating in an environment which is consistent with the agreed upon industry best practice,” Jones concludes. “If that is the case, Takers will the get the benefit of that confidence.”