OptAxe, a financial technology startup, has launched a new multilateral trading facility (MTF) for foreign exchange options trading after receiving authorization from the UK's Financial Conduct Authority (FCA).

New FX Options Trading Venue Launches in The UK

The London-based company aims to address inefficiencies in the FX options market by centralizing liquidity discovery and execution on a single platform. OptAxe's MTF aggregates axe inventory from multiple issuers, providing traders with a consolidated view of available liquidity in real-time.

"We set out to bring much-needed innovation to the FX options market, improve liquidity discovery and unlock previously untapped trading opportunities," said Chris Jackson, CEO and Co-Founder of OptAxe. “We automate manual, bilateral processes and consolidate available axe inventory into a single platform, effectively acting as a multi-issuer, not a multi-dealer platform, RFQ-based venue.”

The FX options market, estimated at approximately $300 billion in daily trading volume, has traditionally relied heavily on voice trading and manual processes. OptAxe's analysis suggests that only 25% of bank-to-client axes are successfully distributed through conventional channels.

The new platform aims to streamline these processes by automating axe distribution and providing a centralized source of actionable inventory. It offers connectivity options via web interface and APIs, including FIX and REST protocols.

"With OptAxe, all market participants can easily access a centralized source of actionable axe inventory with evidence-based pricing that meets the demands of the trading community today and tomorrow,” Yorke O'Leary, COO and Co-Founder of OptAxe, added. “Securing FCA approval to operate a regulated MTF for FX options trading is a significant milestone for OptAxe and represents a step-change in how the industry operates.”

The launch comes at a time when regulatory changes, such as Uncleared Margin Rules, have increased the cost of running FX options businesses. OptAxe's regulated MTF status may help market participants navigate these challenges while improving efficiency in trading operations.

The company spent two years in the FCA's Pathway Programme before receiving full authorization as a trading venue. OptAxe states that its platform is now ready for use, with all necessary technical development and integration work completed.

Understanding FX Options and Market Challenges

Foreign exchange (FX) options are financial contracts that give the holder the right, but not the obligation, to buy or sell a specific amount of currency at a predetermined exchange rate on or before a set date. These instruments are crucial for businesses and investors looking to manage currency risk or speculate on exchange rate movements.

However, according to OptAxe, a large portion of potential trades never materialize, leading to missed opportunities for both banks and their clients.

Several factors contribute to this inefficiency. The fragmented nature of the market makes it challenging for participants to find the best prices and counterparties. Additionally, reliance on manual processes can lead to delays and errors in communication. The lack of a centralized platform for distributing and accessing information about available trades further exacerbates these issues.

These inefficiencies not only limit market liquidity but also potentially increase costs for end-users. They can also make it more difficult for companies to effectively hedge their currency risks, which is a crucial function of the FX options market