The Silicon Review
“Our core aim is to maximize the efficiency of the interactions between LPs and clients.”
FXSpotStream®, a bank-owned consortium, operates as a market utility providing the infrastructure that facilitates a multibank API and GUI to route orders from clients to liquidity providers.
The company is based in Jersey City, NJ and also has offices in London and Tokyo.
Interview Excerpt: Alan F. Schwarz
Q. Brief us about the history of your company.
FXSpotStream (FSS) was created in 2011 as a market utility to reduce the costs of trading FX. The core model remains the same today. Clients pay nothing to access liquidity from up to 15 tier 1 Liquidity Providing (LPs) banks via a single API or GUI from New York, London, and Tokyo sites.
LPs are charged a flat fee to trade an unlimited amount of volume, resulting in the LPs paying less on a per million basis as their volume grows and with no additional charges to pay to FSS each time a client is added. As a result of the FSS model, clients can expect to receive better pricing from the LPs.
In addition, for clients, there is no need to add a new physical connection every time they want to add a new LP. When a client wants to receive pricing from a new LP, it’s as simple as flicking a switch because we have normalized all of our banks’ APIs. In addition to the efficiencies of the physical connection and one normalized API, there are also significant benefits from our team coordinating most of the onboarding work. This means less waiting time, a faster go-live, and ultimately, a better experience and faster time to market for our clients and LPs.
Q. What new endeavors is your company currently undertaking?
In 2020, after raising capital from our founding banks to support a new project, we began work to introduce added functionality to support FX Algos and Allocations over our API. Clients will now have access to our current LPs' entire algo suite, equating to over 70 different algos and over 200 different parameters. Clients will not pay us a fee to access any of the supported LP algos. This was a key focal point for FSS as the ‘free to taker’ model has always been a constant in our service. Any fee an LP may charge for access to their algos, of course, we do not influence.
This will be the industry’s first multibank Service FX Algo API, with most Algos today being supported by others over a GUI. It is yet another example of FXSpotStream leading the market in terms of innovation.
As part of this initiative, we will also be supporting pre- and post-trade allocations, allowing clients to allocate orders sent from multiple accounts at the time. We expect this support to be live in Q2 of this year.
The functionality to support FX Algos and Allocations offers as much of an opportunity to new clients as it does to existing ones. By normalizing our API for all Algos, we will allow clients to connect in the same way as they do today for our streaming service, removing the need for additional infrastructure on the client’s behalf. Our core aim is to maximize the efficiency of the interactions between LPs and clients, and there is no need to add a new physical connection each time a client wants to add a new LP.
Q. What are the key factors that determine your company’s success?
The measure of success for us is our volumes, clients, products, and functionality. The more activity we can bring to the Service through supported volume, the lower the effective commission rate is for our LPs.
In addition, having a reliable and resilient Service is critical to our clients and LPs. As an example, in March of last year, we saw extreme volatility in the FX market. Orders submitted via the Service increased 62 percent, and message updates surged. However, the FSS infrastructure, connectivity, and communication tools functioned flawlessly in March 2020, and we were up 100 percent of the time.
Also, FXSpotStream is a fully disclosed Service. This allows clients to know who their counterparty is at all times. That is of even greater importance when clients need to get done during volatile times. Again, in March of last year, we witnessed an orderly market with banks pricing consistently and risk being transferred with clients using our Service.
As a result of the many attributes of FXSpotStream, we have continued to grow the Service both in terms of overall volume and clients, year after year. We have seen a continued migration from anonymous to disclosed channels such as ours.
Q. Could you describe your typical management style and the type of employee that works well at FSS?
We are about getting things done and moving the ball forward. We have been successful as a company for many reasons, but one of the main reasons is simple – work hard and close. So, people who succeed at FXSpotStream understand we avoid noise and look to progress. I also believe that you have to pay attention to the details. We are a technology company and details matter to us. The smallest details can prevent a client from connecting, orders being sent as expected, or business from being lost.
In addition, I have always viewed excellent client service as essential when it comes to running a business. Often as companies grow, the first thing that people forget is customer service. Our clients have choices, and we are often their choice because we respond to their needs, fix issues they encounter, and we respond to them when they have an issue. I believe these things are relatively easy to do but often don’t get the required attention.
Even though we recently celebrated our ninth anniversary as a company and have seen tremendous growth year-on-year, I emphasize a small-business mentality with our team. We take nothing for granted and leave no stone unturned. I see these as vital characteristics that have allowed us to close the competitive gap and move ahead.
A Relentlessly Reliable Leader
Alan F. Schwarz, Co-founder, serves as the Chief Executive Officer of FXSpotStream. He graduated from Rutgers University with a degree in Political Science. He then attended Rutgers Law School, where he received a law degree. After 10 years in private practice, in early 2000, Mr. Schwarz moved in-house and eventually joined BrokerTec, becoming their Global General Counsel and Chief of Staff. Like FXSpotStream, BrokerTec was a bank-owned consortium offering a matching engine for the fixed income market. BrokerTec began his introduction and interest in technology, the financial markets, consortium-owned businesses, and the commercial side. In 2009, he co-founded his first start-up to incubate systematic FX trading teams by offering them capital, infrastructure, and trading software. Mr. Schwarz’s first start-up, along with his years as a lawyer and at a bank-owned consortium, positioned him well for the co-founding of FXSpotStream in 2011.