LMAX Exchange, an electronic trading platform for foreign exchange, is proving as disruptive to currency trading as its former parent Betfair was when it introduced the exchange concept to the sports betting sector.
Before topping trading volumes of $1trillion in 2013, LMAX had experienced a bumpy ride as take-up of exchange trading was slow. Six months after the platform’s launch, David Mercer, 43, a former banking executive and currency specialist, joined as chief executive and refocused the business on institutional customers. He then led a £2.4m buyout of the company from its listed parent in 2012, with management taking a 67% stake, while Betfair retained a 33% interest.
Like Betfair, LMAX Exchange doesn’t risk its own money — it simply matches orders and charges a commission. Orders are visible to everyone and if two orders match, neither party is able to reject or requote a trade — unusual in the often opaque world of foreign exchange.
LMAX says its proprietary technology can process up to 400m orders a day with trades taking less than four milliseconds to execute.
Clients including fund managers, brokers and individual day traders use the company’ s three distinct trading platforms to trade on 70 different currency exchange rates as well as stock market indexes, commodities and precious metals.
Last year the company launched a market specifically for trades between banks, with a minimum deal size of $1m (£590,000) and now counts more than 20 top-tier banks as clients.
Mercer expects that in the future the bank platform will account for up to half of the company’s revenues — which represent commission — and LMAX expects to make a profit for the first time this year. “Attracting and retaining large bank clients is one factor behind the company’s phenomenal growth in revenue from £271,000 in 2010 to an annualised £18.4m in 2013,” he said.
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