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LMAX, the new platform set to transform retail contracts for difference (CFD) and FX trading, launched today. LMAX will initially allow customers to trade rolling spot FX contracts and CFDs in equity indices, commodities, bonds and interest rates with other asset classes to be added to the platform in due course. LMAX is the first CFD multi-asset trading venue with central clearing which does not take positions against its customers.
LMAX provides the retail CFD and FX investor with a highly sophisticated but easy-to-use neutral platform that seeks to offer traders a fairer and more transparent alternative to competitors' offerings. The platform is an exchange* that brings together retail and institutional buyers and sellers in a wide variety of financial instruments on a level playing field. Through the exchange, LMAX delivers customers fairness, transparency, neutrality and a more efficient and open way to trade. LMAX also provides its customers with a community that allows them to share ideas, trading strategies and actively contribute in the development of the platform.
Betfair, the world’s leading sports betting exchange, established LMAX and is the majority shareholder in the platform. Betfair changed the sports betting market by allowing its customers to trade against each other and invented the first truly successful exchange model for sports betting. The LMAX exchange solution, which has been developed over several years of rigorous research and development, is based on Betfair's original matching engine but has applied and refined this model for financial trading, alongside proprietary and scalable in-house technology.
CFD trades are cleared via the clearing house, LCH.Clearnet Ltd. A clearing house sits in the middle of a trade, assuming counterparty risk involved when two parties trade.
Robin Osmond, Chief Executive of LMAX, commented: "The current broker-led model for online trading of CFDs and FX is outdated and doesn't work to directly benefit the customer as the interests of parties are not aligned. We are bringing transparency and fairness to the market by providing an exchange platform and a business model that clearly wants its retail traders to be as successful as possible. For the first time, retail CFD and FX traders can access an open order book with wholesale institutional liquidity across a wide variety of asset classes with all the protections you would expect. LMAX offers traders the ability to make a market rather than be passive takers of broker prices."
The platform has been designed to bring some of the key benefits of institutional trading (such as increased transparency, deeper liquidity and central clearing) to the retail trading market. LMAX is the first Multilateral Trading Facility (MTF) where retail customers can trade CFDs and the first to offer central clearing. The MTF model and centralised clearing provides the transparency and security that the retail market has lacked and which clients, regulators and the market are increasingly demanding.
LMAX is a neutral and transparent service as customers can see their orders on an open order book. Traders benefit from the ability to place an order directly onto the platform with no dealer acceptance and no re-quotes. In order o provide high levels of actionable liquidity, sophisticated market makers are providing institutional pricing on the platform. Retail traders will trade against each other or these institutional liquidity providers. In addition, customers can set or take a price of any given instrument – in essence, retail clients can become market-makers themselves on the LMAX platform.
Osmond added: "Using LMAX, traders are able to make their own price rather than being restricted to just taking prices. We have a very different model from anyone else in the market and believe that customers will find this extremely attractive. We are an MTF, and the market participants – both retail and institutional – determine our prices. LMAX brings the benefits and efficiencies of institutional exchange trading to the retail market and this is long overdue."
*LMAX is a Multi-Lateral Trading Facility (“MTF”) as defined in the Markets in Financial Instruments Directive (“MiFID”)
