Cognotec offers liquidity module

LONDON - Cognotec has signed five retail foreign exchange brokers for use of its liquidity management module, RealStream Liquidity Manager, which it is officially launching today (April 6).

Two retail brokers - based in the US and Europe - are set to go live with the module this week, said an official at the Dublin-based vendor. This follows the launch of the module with the vendor's first retail broking client at the end of last week.

Mike Thrower, global head of sales and marketing at Cognotec in London, said increased regulatory pressure in the retail FX market is one of the primary reasons the module has garnered interest among retail FX brokers (FX Week, March 2).

"From the conversations we are having with brokers, there is a strong desire to take control of liquidity and risk management," he said. "Regulators are continually focused on the risk management and control aspects at retail FX brokers, particularly in Switzerland and North America."

Both regions have tightened their grip on the burgeoning local retail FX markets, with demands for higher capital requirements, among other things (FX Week, April 14, 2008 and March 2).

The module, which integrates with third-party trading platforms, enables brokers to build and manage their own liquidity based on their preferred liquidity providers. It has a rules-based deal execution and order management tool, and enables price management, smart order routing, real-time position management of trade flows and hedging configuration. It is also structured to help reduce trade rejects and re-pricing.

Risk management features of the module include position aggregation and rules-based hedging algorithms that automatically manage risk exposures.

The platform uses FIX-based adaptors to connect to multiple pools of liquidity and is currently connected to six unnamed banks. Cognotec has been developing the platform since September last year, and started testing with the banks and brokers in January.

"We have signed five of the top 15 retail FX brokers for this platform, and have had quite a lot of interest from other major brokers," said Thrower. He added that two retail FX brokers are expected to go live with the service by the end of next week.