FX platforms target white labelling

Since its inception, Squared Financial Services (Squared) has continually invested in its product offering, technology and people, as it strives to become the platform of choice among all participants in the EFX market space. Today, the results of this investment are plain to see, as Squared Financial is poised to reap the rewards of its pursuit of excellence.

Squared was founded in 2005 by its current chairman, Philippe Ghanem, and director, Georges Cohen. It is an independent, full service broker headquartered in Dublin and is regulated (and MiFID authorised) by the Financial Regulator in Ireland.

At the very beginning Squared evolved from its founders' frustrations as professional traders. The platforms Messrs Ghanem and Cohen were using did not give them the freedom, functionality or competitive pricing that their individual styles required. The decision was made to develop their own platform and Squared Financial was born.

Since then, Squared has continued to develop and enhance its platform and after considerable investment in late 2009, its executives believe it is in an extremely strong competitive position – nimble enough to adjust to individual clients' needs with a product to compete with the very best in the market place.

Squared's proprietary platform, Squared Trader, provides round the clock ECN-style (variable spread) precision FX trading from execution and reporting right through to settlement. Competitive access to the world's largest FX liquidity providers is through Deutsche Bank, Suisse, RBS, UBS, Goldman Sachs, Citi, Bank of America Merrill Lynch, BNP Paribas and Nomura – with more to come. They also use non-bank liquidity providers to deliver a product appropriate to different trading styles – this, says Mr Ghanem,  is one of Squared's keys to success.

“We recognised very early on that price and depth were our key USPs in terms of  product, and in order to keep them competitive we had to enter into consultative relationships with our bank liquidity providers,” he says.

“In order to enhance these relationships further it was essential that we developed a separate stream, outside of our major bank relationships, for our more aggressive order flow.”

Squared Trader users can choose from a range of multi-panel trading modules to reflect their preferences and strategies. Squared Trader has the ability to quote for different trade sizes, both in the normal quote window for the best bid/ask for a particular size and a different window is available so that the best bid/ask and the best prices for each bank at those sizes is shown.

Both spot and forward transactions are supported and the swaps window allows the user to price these via a ‘Request for Quote' and then to execute via the online platform.

For asset and money managers there is a unique multi-allocation grid, allowing an executed trade to be split between multiple managed accounts according to allocations defined by the manager – one click trading for multiple client accounts.

They also have an Order Management System which operates similar to an exchange. As soon as an order limit is reached it is executed immediately. Also on offer is a cross currency margin netting functionality which allows clients to offset long and short positions, in different currencies, against each other, allowing the individual client to optimise their margin levels or trading power.

Throughout the trade process clients have access to trade confirmation and reporting facilities. Trades are confirmed within milliseconds as soon as they are hedged with Squared's trading counterparty and Straight Through Processing considered a vital offering in today's market.  A variety of real time and historical reporting tools are also available, providing a complete audit trail of all executed trades.

In addition to trading and confirmation, Squared recognise the importance of the highest level of client support and service and have a 24 hour multilingual team available to deal with queries or execute trades on a client's behalf.

There are, however, certain areas of the business that are always a concern for any EFX broker. John Miles, managing director, believes this can sometimes be the key factor that distinguishes one provider from the other.

“Whether you are providing institutional type spreads to high net worth individuals, the very best in client service and support to asset managers or user friendly ultra-fast execution on tight spreads and large volume to institutions, there are always two areas of EFX trading that can catch you out – slippage and latency,” he says.

“We at Squared recognise that unless these are eliminated from the trade cycle clients will ultimately lose confidence in the platforms functionality and to this end, this elimination remains a constant priority on the technology side of the equation.”

Major changes have occurred in the way banks provide rates in the FX market. In mid-2010 the number of prices per second (ticks) sent by banks to Squared's servers had increased 5 fold in some instances, over the levels seen in 2008. The direct consequence of this phenomenon, if not addressed, would be a significant decline in price validity and an increase in slippage and requotes on trades. This, for some providers, has induced a lot of uncertainty among their professional users relying on automatic FX trading systems and day traders dealing with high volume per trade.

Latency is also a critical issue for all traders since it creates risk no matter where it is introduced into the trading cycle. It can be affected by a number of factors – the client's own system and quality of connection, the architecture of the liquidity provider's system and its connection, as well as the computing time of the EFX broker's platform itself. Squared admits that some of these factors are outside of their control for obvious reasons – and hence there is a certain amount of latency that will never be eliminated – but it is continually investing in ways to reduce it to an acceptable level.

One method adopted to address this issue was the design of a proprietary trading algorithm and several trade execution modes which enabled traders to execute trades with the minimal amount of slippage. Because the market has developed and the number of ticks has increased dramatically from only a few years ago, Squared is continually upgrading to higher speed data lines from the liquidity provider to its servers and, in some cases, to its clients.

Squared's innovative business model provides complete transparency throughout the trade cycle: no fixed spreads, streaming prices from the world's largest liquidity providers, no speculative positions against the client and no competing with their positions. Its best of breed platform gives the end user the opportunity to see the depth of the market and enough liquidity is available to accommodate any category of client.

FX broking has developed to a very diverse and sophisticated level, with clients demanding more and more from their providers. Squared has moved progressively with this demand, continually investing in platform evolutions in order to meet client needs and those of a rapidly changing trading environment.

White labelling is one area which is experiencing dramatic growth and evidence of Squared's professionalism and adaptability was witnessed by the recent awarding of a large deep white labelling contract in the UAE. As Philippe Ghanem points out, “the awarding of this project was testament to our ability to deliver, in record time, exactly what the client required. To win this contract against competition from some very well known larger institutions, and the professionalism of the team from inception to delivery of this, is indicative of where Squared currently stands in this market place.”

Squared recognises that it operates in an exceptionally competitive market place. As the market changes, continual evolution is paramount but the future is looking bright – after a year of investment in technology there is a renewed focus on sales, there are more white labelling projects in the pipeline, its Dublin operations are expanding, and there are plans for a London representative office in early 2011. Its “wait and see and move late” approach to the EFX market will have reaped its dividends and further success will ensue.

For more information tel: +353 1 6621913; jmiles@squaredfinancial.com;
www.squaredfinancial.com

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