EBS proposes Aggregation Best Practices and Partner Programme to enhance transparency and integrity in the FX Market
London and New York, 17 June 2013 – EBS, ICAP’s market-leading electronic FX business, today announces its proposals for introducing Best Practices to Aggregation for the FX Market coupled with the EBS Certified Aggregation Partner Programme.
EBS recognises that aggregators are an increasingly prevalent service offering for customers which have emerged to consolidate the many sources of liquidity available and believes that aggregation providers can enhance and add great value to a customer’s trading experience. As part of the process of market evolution, EBS is proposing the adoption of best practices in the way that these services interact with the rest of the market and its infrastructure and how those interactions are defined and disclosed to market users. EBS regards this as an opportunity to create standardisation and is establishing an Aggregation Partner Programme for aggregators that wish to connect to the EBS system, in order to ensure consistent, fair and transparent market access for FX market participants.
In a paper released today, EBS sets out its approach along with a series of programme and certification guidelines aimed at ensuring that market users achieve the very highest level of best execution and transparency:
Aggregation providers should operate as agents, rather than principals to the trade, to reduce the opportunities for potential conflicts of interest.
All sources of revenue earned by aggregation providers with respect to a customer’s trading must be fully disclosed to the customer. While the customer is aware of the fees they pay directly to the aggregation provider, this may represent only a limited portion of the commercial interest obtained from the trade and significantly affect the prices the client sees or its relationship with its pricing providers.
The prices a customer sees as ‘best prices’ should be based on the best prices available to the customer, namely:
Prices/spreads available to the customer should not be affected by the aggregation provider’s existing brokerage arrangements with liquidity or credit providers for the aggregation provider’s own commercial interests.
Aggregation providers should purely provide aggregation services rather than trading themselves (directly or through a third party) on a newly available and improved price while making available a lesser ‘acceptable’ price to the customer.
The sources of liquidity and credit provided and any potential conflict of interest should be fully disclosed to the customer.
EBS will begin a consultation process with customers and partners to ratify the proposed best practices and the Aggregation Partner Programme. Following this process, aggregation providers will be certified under the EBS Aggregation Partner Programme. Only certified EBS aggregation partners will have the ability to develop technology links to integrate EBS liquidity (either EBS Market or EBS Direct) into their aggregators, directly or indirectly (with certain accommodation for grandfathered solutions).
The paper can be viewed at www.ebs.com/aggregation
Chris Purves, Global Head FX E-Trading at UBS, commented: “This topic of aggregators has not been widely discussed and looked at by the market as a whole and it is certainly an important one to address. We are pleased to see EBS taking an industry leading position on this important topic and look forward to supporting this initiative.”
Dr Richard Bentley, VP Capital Markets at Progress Apama, said: “As a provider of aggregation and smart execution solutions to the FX marketplace, we recognise the importance of providing customers with a true, up to date picture of market liquidity. We welcome the steps EBS has taken to define guidelines for aggregation and fully support the underlying principles of transparency and impartiality that these guidelines represent.”
James Sinclair, CEO of MarketFactory, said: “An orderly market depends on transparent business rules and logic. This includes aggregators providing a true and accurate representation of liquidity. We are strong advocates of open and disclosed execution rules, as these proposals promote.”
Gil Mandelzis, CEO of EBS, said: “We at EBS believe passionately in the importance of transparent, fair and ethical markets. We see an important opportunity to create global standards that we and our partners can work to, as we seek to improve best execution and transparency for market participants. This is an exciting new initiative for EBS and, we believe, for the market as a whole.”