Cboe FX Extends LP Code Compliance Requirement
Posted by Colin Lambert. Last updated: January 11, 2023
The pressure on non-FX Global Code compliant liquidity providers is being ramped up further with Cboe FX announcing that effective April 3, all market makers on its anonymous spot FX platforms will need to have signed an updated Statement of Commitment.
Following the publication of the updated FX Global Code in mid-2021, FX market participants were strongly encouraged to renew their statements within 12 months. In 2022, Cboe FX broke new ground for the FX platform market by requiring Code-compliance by its LPs on its full amount platform, that has now been extended to its ECN.
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This is a significant move by Cboe FX with 93% of volume on its venues executed anonymously. It also represents the latest push by the platform to establish itself as a “most-trusted” venue in the spot FX market – one of its core tenets of the past year or so has been to raise transparency and promote even better behaviour on its venues.
Although there will undoubtedly be the odd LP caught out by this move (they still have until April 1 of course), it is unlikely to hurt Cboe’s FX volumes, which is an argument occasionally (and privately) put forward by other platforms, because not only will other LPs feel more confident in pricing there, but clients should also be more attracted to the venue.
In the bigger picture, with similar moves announced by Euronext FX and 360TGTX in recent months, this is likely to ratchet up the pressure on those LPs who have not adhered to the Code, but it is also to be hoped that venues that still do not promote Code-only liquidity will also feel the pressure.
There is a definite trend towards pushing out non-Code compliant LPs as the data would appear to indicate they offer worse outcomes for clients, this is to be welcomed – as is this latest announcement by Cboe FX.
The big question is, will this move be rewarded? It should be, and those customers operating on venues that do not promote Code-only liquidity should be asking some very pointed questions – not least of themselves and how they are being treated by certain LPs.
“This represents another significant step in our efforts to be the most transparent platform in FX and to further enhance the quality of execution achieved by our clients,” says Emily Eimer, head of liquidity management for Cboe FX. “It follows our decision in August 2022 to allow ‘code-compliant only’ liquidity on our Full Amount platform, which was extremely well-received. This – together with our other Market Making Standards – helps to ensure our clients continue to have the best possible trading experience with us. We believe we continue to set new standards in the industry and support the goals of the FX Global Code to promote best practices and improved transparency.”