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DEC 16, 2020

Brokerage Services Using NCFX Data – Why is it different?

Differentiated Brokerage Services Using NCFX Data

New Change FX (NCFX) is a data vendor, producing the world’s only live, streaming Foreign Exchange benchmarks. NCFX is regulated by the FCA as a Benchmark Calculation Agent and complies with ESMA rules. We are also suppliers of Transaction Cost Analytics based on the NCFX Benchmark data. NCFX is not involved in any form of trading in order to ensure that our data quality remains paramount.

Our clients for data include:

  • Central Banks
  • Sovereign Wealth Funds
  • Hedge Funds – most notably large systematic funds
  • Asset Managers
  • Asset Owners – Pension Schemes, Family Offices etc.
  • ECNs
  • Brokers
  • Banks

Data Quality

NCFX produces a benchmark data point every 50 milliseconds for spot, and every second for forwards. Each benchmark has its own timestamp embedded in its FiX message, and so each point is always correctly assigned in time. We cover 72 currency pairs for spot and 38 pairs for forwards. The data is aggregated directly from the ECN layers and produced as a mid-rate feed either as a cross-connected feed, or via FiX API. We also supply APIs to access our databases. The head of quant analytics at a very large asset manager recently described NCFX data as ‘the best data on the street’. We agree.


NCFX Data is not available for trading, so it is fundamentally different to data received from trading platforms. The function of a benchmark is to provide transparency and diminish search costs. In an OTC market prices are a reflection of the market clearing rate plus a mark up which produces a customised idiosyncratic price that the client sees. The benchmark serves to identify what that clearing rate is.

When a client transacts with a broker, the broker must obtain inventory from the market to fill the transaction, thereby altering their own mid-rate. Any analysis performed on the adjusted mid-rate hides the broker’s own market impact cost. The broker’s own activity has created skew, thereby obscuring the true clearing rate. This cost is hidden from the client but is actually part of the idiosyncratic cost. Measuring against the unbiased NCFX Mid-Rate allows the true idiosyncratic price change to be identified. Measuring costs against the NCFX data feed is accurate.


ESMA document JC2016 21; the Regulatory Technical Standard for Priips and Mifid 2 stipulates in Annex IV, ‘Methodology For Calculation Of Costs’, Point 17 that:

‘In calculating the costs associated with foreign exchange, the arrival price must reflect a reasonable estimate of the consolidated price, and must not simply be the price available from a single counterparty or foreign exchange platform, even if an agreement exists to undertake all foreign exchange transactions with a single counterparty’.

This means that data from any platform cannot be used to measure FX costs and disclosures to clients on that basis are in breach of the regulation for the reason noted above. NCFX Data solves this issue.

Brokerage Use Cases

The usual model for brokerage is to take as much money as possible from the transaction – essentially testing the client’s tolerance for pain before establishing what can be charged for a transaction. This model is outdated, and technology is evolving to remove this kind of hidden transaction charge.

Using NCFX Data to differentiate a brokerage offering

NCFX live data feeds can be used in several different ways:

Benchmarking a feed

When NCFX data is brought into harmony with the feed being used by a platform to execute business it becomes possible to derive time stamps from the feed itself rather than accepting latent time data from the EMS. By doing this any analysis conducted on the execution is rooted in accurate time data rather than post-processing time data. This moves the client’s line of sight from the EMS layer directly into the market interaction layer, giving real insight to market impact and the unit cost of volatility by using data direct from the coalface. Each interaction with the feed (receipt of message, fills, misses, etc) can be measured and controlled.

A/B Modelling

Where a broker offers clients the ability to select LPs for their feed, NCFX data is useful in A/B Modelling to establish which brokers are improving the transaction quality, and which are reducing it. The existence of a standard and calculations such as the efficient price and unit cost of volatility mean that the client has a clear yardstick that takes market conditions into account when conducting this testing.

Live Axe Analysis

Where the broker is streaming multiple LPs into an aggregation it is possible to run the NCFX data against each feed to judge the bank’s individual axe. This information in combination with fill ratios enables the Smart Order Router to select counterparties based on the likelihood of a successful fill and its related market impact rather than simply taking the best bid or offer.

Pure Agency

Where a client wants complete transparency on their execution, they are able to use NCFX data to establish a ‘Pure Agency’ model which moves away from existing agency models. At present agency models are unclear, and best execution is a muddled concept – the confusion stemming from the lack of a benchmark. By using the NCFX midrate to evaluate every execution it is possible to judge execution quality against a benchmark and demonstrate to the client that from all of the available price feeds, the correct one was selected.

Billable Spread

Pure Agency can be taken a step further into a Billable Spread model which provides complete transparency on every execution. The client calls for a price, and liquidity is obtained by the broker in the market. The NCFX rate at the point of execution of the cover is recorded, and that is the rate at which the client transacts. The spread cost to the cover trade is then carried by the broker until a bill date at which point the client receives a bill for the spread and the broker’s service charge. The bill is completely transparent and tax deductible, and the FX transaction has been executed at the market clearing rate.

Guaranteed Spread

Where a client has very steady, predictable business, as is the case for most asset managers who are not speculating in FX, it is possible to assess the historical cost of execution against the NCFX Mid-Rate and establish a fixed price deal against the NCFX rate. This gives the client certainty with regard to their costs, and usually this kind of deal would be structured to allow a regular improvement over the contracted price, making the execution process both transparent and of benefit against the client’s budgeted FX costs.


The benefits stemming from using an independent midrate benchmark in FX execution processes is clear. They include:

  • Compliance
  • Transparency
  • Correct analysis
  • Choice

By using NCFX data a broker is able to demonstrate these aspects of their service. Without them they are just another broker.


Shining a light on the true costs of trading foreign exchange.

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