This Saturday marks the inaugural London Prop Trading Expo.
Bridging and risk technology provider Gold-i will be exhibiting their products at the show and appearing on a prop partners panel.
With that in mind, we spoke to Gold-i Founder and CEO Tom Higgins about why the company has become so popular with props and what firms thinking about entering the space need to get right on the tech side.
You’ve worked with brokers for a long time but the prop model is slightly different. One obvious difference is the fact most trading is simulated. What problems does that cause for props and how can Gold-i’s technology help solve them?
One of the biggest challenges in the prop model is how to create a realistic simulated trading environment. Initially, many firms used very basic simulation – trades would be filled instantly at the top of the book, with zero latency or slippage. This wasn’t an accurate representation of trading and didn’t prepare traders for real execution conditions.
To offer a credible and fair challenge, prop firms need technology that mimics the complexity of trading with real Liquidity Providers. That’s exactly what Gold-i’s technology can help with. Our MatrixNET liquidity management platform enables prop firms to fully simulate Liquidity Provider executions. It has customisable settings relating to latency, slippage, partial fills, rejections, and other market conditions, just like a live trading experience. With our technology it is almost impossible for traders to tell the difference between a simulated LP execution and a real one.
MatrixNET is integrated with over 80 Liquidity Providers and 35 crypto exchanges so prop firms can simulate real market trading conditions in FX and crypto from a single platform. When traders progress beyond the evaluation stage to live trading, we are set up to accommodate this, too. MatrixNET is integrated with all the major prop trading front-end platforms, making the transition between the simulated and real trading environments seamless and simple for prop firms and their clients.
A knock-on effect of that is pricing. Brokers are typically charged volume fees but if there is no ‘real’ money, you have to work around that. So how do you work with props in that regard?
The traditional model that is commonly used in the industry is to charge either the same or more for simulated execution as for A-Book execution. However, Gold-i takes a different approach. Mindful that prop firms make very little money during the evaluation stage, we’ve created a commercial model that takes this into account.
We typically charge a per-user fee during the evaluation stage, with no transaction fees, mirroring how most prop firms operate. Once traders move beyond the evaluation phase to the funded stage, we switch to transaction-based fees. Our pricing aligns with the prop firm’s business model and supports their growth at every stage.
A huge problem props continue to face is abuse and fraud – what do you see happening here and can Gold-i offer technology to deal with abusers?
Abuse and fraud are significant issues, not just in the prop space, but across the wider brokerage industry. Gold-i has developed technology which protects B-Book brokers from fraudulent activity, and this technology is equally effective for prop firms facing similar issues.
Our technology helps detect and prevent common types of abuse, such as latency arbitrage and shotgunning, price manipulation, and other forms of system exploitation. MatrixNET has built in risk management features, and Gold-i’s Visual Edge can help firms to automatically identify traders who are trading in a fraudulent way, monitor toxic clients and identify unwanted scalpers.
We are seeing some props either add crypto or launch pure-play crypto prop brands. Gold-i has built more of a crypto-focused suite of products compared to peers, so what have you been able to offer props?
We’ve taken the institutional-grade technology we built for FX and extended it seamlessly into the crypto space, giving prop firms the flexibility to offer crypto, FX, or both from a single platform.
Crypto is a natural fit for the prop model: it is volatile, trades 24/7 (unlike FX which is 24/5), and appeals to a global audience. We provide access to multiple exchanges and crypto Liquidity Providers, enabling clients to trade high volumes of crypto, with large ticket sizes.
Importantly, we are able to offer 24×7 support, ensuring that our prop firm clients have access to high quality technology support at all times.
Some people have been very sceptical of the prop model. Having worked in the industry for over two decades now, what’s your perception of it? Obviously, we’ve seen trends and products come and go in the past, how do you think it compares to those?
Like any new model, prop trading went through a hype phase, and unfortunately, some bad actors took advantage early on. However, the market has matured. Many of those unscrupulous firms are no longer around, and the industry is now operating on a more stable, professional footing.
There is fundamentally nothing wrong with the prop model. In fact, it is an evolution of what we saw 30 years ago, at the start of e-trading, when trader arcades were popular. People would go to a room in the City, trade on a computer, and be managed by a broker.
Those who traded successfully were given money to trade and a share in profits. When run correctly, the model is fair and effective. It is a way of educating traders, their risk is limited during the evaluation stage, and those who show skill are rewarded. If it is run transparently and with proper oversight, this model benefits everyone involved.
A lot of brokers have either launched props or are weighing up doing so. From a technical point of view, are there any big differences that you see between the two business models? If someone was accustomed to running a brokerage, what might surprise them if they started running a prop?
The biggest difference is scale. In the prop model, especially during the evaluation phase, there’s no real capital at risk, so trading volumes are huge. It is not unusual to see millions of transactions per day and trillions in notional volume each month.
This means that the technology infrastructure needs to be able to handle far more clients and far higher throughput than for a typical brokerage. Prop firms earn less per client but serve many more clients, so performance and scalability are critical. It is a different business model but the pressure on the technology is far greater.
Gold-i has developed and tested our systems to support such high volumes. We have focused on performance and large transaction sizes and our systems are robust enough to meet the high demands of a prop firm.
From a technical point of view, if a broker wants to evolve and launch a prop offering, Gold-i can provide them with everything required – including a professional trading experience in the evaluation and live trading phase, access to multiple asset classes, risk management and reliable, scalable infrastructure. We have a very strong track record in helping prop firms to thrive.
The London Prop Trading Expo is taking place at The Grand Connaught Rooms, London on Saturday 27 September. Gold-i’s, COO, Mark Alvarez-Buylla will be joining a panel discussion at 12.45pm entitled “Finding Your Perfect Prop Partner: Green Lights and Red Flags To Look Out For When Starting Out”, moderated by TradeInformer’s Founder, David Kimberley.
