Best liquidity aggregation service: oneZero

oneZero’s technology helps market participants gain a better understanding of the market, as well as access to quality liquidity, better manage their risk and maximise the hedging potential of their FX portfolios

The pick-up in FX volatility – induced by the interest rate rises of the world’s major central banks – significantly accelerated the pace of trading throughout the early parts of 2022, making it difficult for some market participants to handle the exponential increase in the quantity of trading data the market was producing. As the speed of the FX market is likely to increase again in the foreseeable future, many participants are now turning to technology vendors, such as oneZero, to help them process the deluge of data needed to find the liquidity that best fits their trading profile.

“Over the first quarter of 2023 we saw the market really speeding up,” says Phil Weisberg, executive vice‑president of strategic planning and partnerships at oneZero. “Market data update rates can now reach half a million messages a second. So, when market participants want to create a liquidity function comprising multiple liquidity providers – each with their own speciality and venues – they really need to choose a vendor that can deliver.”

“At oneZero we processed, on average, 9 trillion quotes per month in 2022. The second a market participant becomes a client, we instantly manage all of their data for them and provide them with a deep analysis of the data, right out of the box and without them lifting a finger. That’s a huge time-to-market advantage.”

The brokers, prime-of-primes and regional banks that use oneZero’s Hub do so, first and foremost, for the breadth of liquidity it provides, which oneZero recently enhanced with the additions of State Street and the Chicago Board Options Exchange as sources of liquidity. However, an additional factor is the firm’s liquidity aggregation technology, which captures, manages and analyses the large amount of data that streams through the Hub, allowing clients to gain a better understanding of the flows they deal with.

Ultimately, by providing its clients with this understanding, oneZero allows them the ability to maximise their liquidity function and optimise the risk and hedging potential of their portfolios. But doing so requires careful manoeuvring.

“When experimenting with the liquidity function, market participants can wind up in a worse place if they are unaware of the consequences of their actions,” points out Weisberg. “This is why we provide liquidity takers with simulations of how their trading will be impacted if they were to try out a new liquidity provider, for example. Likewise, we can help liquidity providers optimise the profitability of their business by analysing their liquidity supply chains and hypothesising how improving their price by X amount could increase the amount of business they could receive from it.”

Additionally, oneZero now offers its Advanced Portfolio Risk Management Framework, which enables clients to efficiently route flows based on their classifications to distinct portfolios, so the most appropriate risk management strategies can be applied.

“With the Advanced Portfolio Risk Management Framework, we’re giving our clients the ability to take a different risk management approach for each particular type of flow they are quoting and hedging. This technique allows them to be very granular in how they manage risk within their client franchise. And, as far as I can tell, we’re one of the only companies that is able to do this for the volume of transactions our clients generate.”

By breaking down portfolios into their constituent parts and managing the unique set of trades that are being hedged, oneZero’s clients can more easily supervise the trades within their portfolios that can be internalised and those that need to be sent out to the market. To determine the best option, oneZero analyses, in real time, its clients’ flow and provides them with recommendations on how best to risk-manage it.

“We use a combination of artificial intelligence and other analytical techniques to categorise each incoming flow to find the appropriate risk management strategy,” explains Weisberg. “It gives banks and brokers tremendous insight into the historical patterns of their client base and what reasonable risk management strategies they should consider.”  

oneZero was named Best liquidity aggregation service at the 2023 FX Markets e-FX Awards.

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