Client case study: How we helped our client take control of their business
When we onboarded our broker client, our first port of call was a full analysis of their business. By introducing them to new operational methods, they’ve been able to recover cash from hedging, tighten their pricing, highlight flow with monetisable potential by introducing a C-book, and we are now in the process of helping them with cryptocurrency pricing and risk management. With a healthy 78% increase in volume, and far greater control over their flow the client has been delighted with the transformation to their business.
Here, we take a deeper look into how MahiMarkets was able to turbo charge this broker’s business.
Before
Before Mahi, the brokerage was a B-booker with a rudimentary A-book. Monetisable flow was brokered, as was B-book flow through bucket tipping. Toxic flow, including a number of large EAs, was unfortunately internalised in the B-book damaging their PnL.
Analytics & Compass Hedging
Using MFX Echo, our analytical tool, our client was able to drill down into their flow exposing weaknesses in their risk management strategy and identifying a number of accounts that were toxic, but still largely monetisable.
Of these accounts, a handful were selected and added into a Compass-managed book as a proof of concept. As the book generated additional revenue compared to brokering, and removed previously undiscovered cost from the B-book, the volume under Compass management was increased and the client became more and more confident in the approach. Since starting with Mahi, Compass has converted this loss making flow into a new revenue stream, generating $15/M through smart hedging, classification and pricing.
No more spreadsheets
As the Compass-managed book continued to deliver consistent PnL, automated classification was added. This management regime allows for Compass to dynamically determine the execution of flow via brokering, last-look, VaR-based hedging or time limited hedging. The classification process is fully configurable and allows for manual intervention, allowing for flexible management for specific instruments, counterparties or channels. Managing hedging and execution via Compass afforded these options and ability to choose.
Price tightening
Using our backtest environment, we tested adjustments to pricing before implementation. This included, but was not limited to:
Limiting spreads during regular market conditions
Reducing price spikes during periods of high volatility and low liquidity
Preventing arbitrage using highly adaptive pricing
Bespoke Hedging
As confidence in MFX Compass hedging abilities grew, the client started to actively use the highly configurable, algorithmic hedging components of Compass enabling them to exit risk in the most efficient way possible. Our hedger allows for full personalisation of rules based on a variety of different triggering parameters, ensuring it is set up to effectively manage risk even in the most volatile conditions.
