Best liquidity provider for spot: Citadel Securities

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Best liquidity provider for spot: Citadel Securities


Over the past 12 months, Citadel Securities has seen global growth across products, markets and regions, explains Kevin Kimmel, head of FX

How did FX spot provision evolve over the past 12 months, and what were the strongest areas of growth for Citadel Securities?

Kevin Kimmel: Over the past year, Citadel Securities has continued to grow its leading FX market-making franchise. The role we play has never been more important and, amid ongoing market volatility, meeting the complex and diverse liquidity needs of our clients remains our top priority. We have continued to make significant investments in technology to ensure we can deliver across all market conditions, and the importance of those investments is on full display.

Citadel’s performance during the heightened volatility in the first quarter of 2022 is a good example. The robustness of our platform and resilience of our pricing allowed us to continue providing a high level of service when clients needed it most. We’re proud of that record and confident in our ability to continue to provide unparalleled access to liquidity across all market conditions.

While Citadel Securities’ growth was broad-based, our bank liquidity partnerships have been a key area of expansion. These partnerships are highly customised for each partner and service, both bank principal and algo desks.

By leveraging our high-quality, low-impact FX spot liquidity, banks can further enhance the level of service to their broad client franchises across Group of 10 and emerging market currencies.

Our services have been particularly successful with bank algo products since we provide low-impact liquidity to minimise market impact.

Our market-making volume to banks increased 65% in the first half of 2022 compared with 2021, while liquidity provision specifically to bank algo products climbed to more than 94% within the same timeframe.

Kevin Kimmel
Kevin Kimmel

In light of increasing volatility in FX markets, how have market participants changed the way they consume spot in the past year?

Kevin Kimmel: We have seen liquidity consumers rethinking their liquidity pools and challenging old assumptions. With the growth of transaction cost analysis tools, many clients are now able to analyse their liquidity stacks and, in certain instances, the data has shown that some liquidity providers (LPs) are not additive. In fact, by reducing the total number of LPs and retaining those that warehouse risk, clients may find tighter pricing and better overall execution. We want counterparties to measure our execution quality and we highly encourage a data-based approach to liquidity consumption.

Selecting the right group of LPs is always important, however, it can also be more pronounced during periods of high volatility when liquidity is harder to find. At these times, it is crucial for clients to have a group of trusted LPs that provide a consistent level of service and warehouse risk. The heightened volatility in the first half of 2022 has again demonstrated how important this is.

How does Citadel Securities view the ongoing debate on last-look hold times?

Kevin Kimmel: When providing liquidity to disclosed clients and on anonymous venues, Citadel Securities configures a five-millisecond last-look period to conduct a range of checks with no additional holding time applied. We believe it is important for all FX Global Code adherents to not apply additional hold times and act in accordance with the guidance provided by the Global Foreign Exchange Committee. While disclosed clients can view each of their direct LPs’ trading disclosures, using last look on anonymous venues is less transparent to liquidity consumers. Subsequently, we’ve also advocated for anonymous venues that allow last look to significantly reduce their allowable last-look periods to create a level playing field and reduce the benefit of additional hold times for LPs that choose to apply them.

How does Citadel Securities see the future outlook for FX spot provision?

Kevin Kimmel: We are very focused on the Asia-Pacific market and are continuing to hire in the region. Our market-making volume in the TY3 data centre in Tokyo surged by more than 10 times in the first half of 2022, with growth and opportunity only set to continue.

Although we are focused on a variety of growth areas, we believe credit inefficiencies continue to be a hindrance across the industry. Unlike other major asset classes, FX lacks central clearing, which would substantially benefit the marketplace by creating greater efficiency and reducing systemic risk. We will continue to advocate for central clearing going forward.

Citadel Securities was voted Best liquidity provider for spot at the 2022 FX Markets e-FX Awards.

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