MFP Trading’s Minerva – Turning Hedging into a Profit Centre

London-based forex execution specialist MFP Trading has launched its game-changing algorithm-fuelled platform, Minerva, offering unparalleled opportunities for prime-of-prime (POP) clients and retail brokers.

The platform leverages advanced technology to close the chasm between institutional and its POP clients to offer unprecedented execution set-ups. POP and retail brokers can now utilise Minerva algos to increase profitability on their customers trading flow with the platform’s unique win-win approach replacing the traditional “pay the spread” approach.

Bypassing the Dominance of Market Makers

Institutions see wider spreads than retail brokers because their flow is more challenging for markets makers to monetize. Minerva allows retail brokers to offer their interest to institutions directly within the spread in essence bypassing the usual market makers. While Minerva is a $250K a year technology, it is now being offered free to all POP and retail brokers. It integrates seamlessly where Liquidity Providers (LPs) would connect in the clients’ connectivity stack.

Apart from this highly sophisticated tool, MFP Trading offers detailed and insightful analysis to their clients to identify which side of their business is suitable to use with Minerva. With this unique tool, brokers can gain a significant competitive advantage in a market that has become largely undifferentiated.

Brokers can now learn more about this novel tool by attending an exclusive workshop being organised by MFP Trading at iFX EXPO International 2022. See below for more details.

How Does Minerva Work?

Minerva is an extremely advanced platform, built by experienced quant traders. Clients can feed their hedging rules into the system, and the platform automatically inputs prices at the mid-market onto its institutional ECN framework. MFP ensures that these prices are displayed at the top of each institutional customer aggregator. Trade matches are maximised, as are revenues generated. The product allows clients to trade without paying a spread. Here is an example of how the process takes shape.

Situation: Different Spreads for POP and Institutional Clients

Spreads are typically wider for large institutional clients than for prime of prime clients. For LPs, it is difficult to monetise institutional flow. Let’s take the GBP/USD forex pair for instance. Large institutional clients typically see spreads of around 2 pips, while the spreads for retail market makers is more like 0.5/08.

The Minerva Solution: Arbitrage in Spreads with the Intermediate Book

Suppose the retail broker wants to buy at 1.35113. Minerva puts a limit to buy (or bid) at the mid spread of 1.3511. On MFP Institutional Trading’s platform, the price will be shown at 1.3511 minus a 0.5 markup, which is 1.35105. When this happens, institutions that were previously seeing 1.3510 as the best bid price, will now see 1.35105. They will find this more attractive as a selling price, than the previous bid price. This increases the chances of a match between the buyer and seller.

Result: Turning Hedging into a Profit Centre

This creates a win-win situation for all parties involved.

· Institutions: They will sell the pair at 1.35105 on the platform, getting a better price than the 1.3510 they were seeing before.

· Retail Broker: The broker saves on execution costs. It will buy at 1.3511, instead of 1.35113.

· MFP Trading: In this case, the company makes 0.5 as a markup fee, which is approximately $50 per million. After covering sales and IT costs, MFP Trading can pay a rebate up to $20 per million to the retail broker, with a 50% profit share.

So, compared to the typical “pay the spread” approach, the total savings here is $80 per million.

With an average experience of 20+ years in institutional spot FX trading, MFP Trading maximises revenues per client. Rebate pay-outs can be higher than shown in the example, for instance, in emerging market currencies.

What Does MFP Bring to Its Clients?

Apart from a highly advanced proprietary technology that they offer for free, the company provides free data analysis. The MFP quant team studies clients’ trade data history to suggest which of their flows is more suitable to Minerva’s passive algos. By doing this, the team also gives an estimate of the savings the approach will yield.

In addition to maximising the order exposure and increasing matches, Minerva turns the mid-market interest from its users into a last look enabled order. This allows the order to be displayed to all clients and all relevant institutional platforms without risking double hits.

Due to its powerful order management system, the technology places orders at the right mid-market level automatically. Further, Minerva will also dynamically adjust the mid-market interest with market movements.

This maximises price improvements when market goes the client’s way. All this is done without disrupting the regular workflow of clients. Orders are confirmed to the clients’ OMS/Bridge instantly while Minerva Results are updated in real-time in front of the user in a dedicated UI.

Minerva’s trading algos have been created by experienced quant professionals. These algos have been tested multiple times to ensure their reliability.

Join the MFP Trading Workshop at iFX EXPO International 2022

Companies interested in learning more about this advanced technology can attend MFP Trading’s workshop at iFX EXPO International 2022, in Cyprus. The world’s biggest B2B fintech expo, iFX EXPO is being held at Palais des Sports, Spyros Kyprianou, Limassol, from June 7 to 9, 2022. Interested individuals can also contact the team for a personalised demo of the platform.

The advanced Minerva platform holds many answers to the much-debated aspects of hedging in the trading industry. It could be a path to maximising revenues for retail and institutional brokers, by not giving up all their spreads. Contact MFP Trading to learn more.