An FX view from the top – XTX co-chief Zar Amrolia

XTX Markets co-chief executive Zar Amrolia

XTX co-chief executive Zar Amrolia

Amrolia, one of the best-known and successful practitioners in the industry, had put his heart and soul into Deutsche Bank’s currencies business for the bulk of his career. Since his appointment as global head of foreign exchange in 2006, he had built Deutsche into a market-leading foreign exchange franchise that was the envy of competitors, topping Euromoney’s closely watched FX rankings for nine successive years. He also led several cross-industry initiatives to address changes in regulation and market structure.

But while Deutsche was one of the few large banks that was not fined for market manipulation, Amrolia saw the evaporation of trust in a fiercely competitive business he had helped to build. It was, he said, like winning Olympic gold and then finding out that seven of the eight sprinters had all doped. It doesn’t really matter in the end that the winner hadn’t actually doped – the whole group is tarnished.

Amrolia’s decision to leave Deutsche in 2015 was motivated not just by banks’ sudden fall from grace in foreign exchange, but also by the growing opportunities for non-bank participants to win market share through innovative technology. He joined XTX Markets, a privately-owned leading non-bank market-maker, as co-chief executive in October 2015 – one of the first and most high-profile moves from bank to non-bank.

Amrolia said: “Big data analytics and machine learning were always going to have a huge impact on the pricing and risk management of flow market products. However, banks just didn’t have the ability to view technology as a business or, frankly, be nimble to move fast enough in this space.”

Non-bank liquidity

High-frequency trading firms had long been the bugbear of large foreign exchange houses, outpacing their technology and compromising their ability to hold risk. But a small breed of non-banks, including Citadel Securities, Virtu Financial and XTX Markets, now pride themselves on using smart technology to provide genuine liquidity.

Amrolia’s new role has given him an industry profile as high as he enjoyed during his time at Deutsche. Both competitors and clients are watching closely as the balance of power shifts and the forex market becomes increasingly dependent on the likes of XTX, while their role in the market structure also becomes more accepted.

“Technology is at the heart of our business model, not an after-thought. At a time when counterparties are monitoring their execution quality much more closely and looking for alternative liquidity providers, this is an exciting place to be.”

Born and raised in London, Amrolia, 53, started his career at JP Morgan and joined Deutsche’s FX options desk in 1995. After four years as co-head of FX at Goldman Sachs, he returned to the German bank in 2004 as head of FX sales and was promoted to global head of FX in 2006.

Amrolia now runs XTX alongside Alex Gerko, an experienced quantitative trader who had originally worked for him at Deutsche Bank. Gerko went on to build a highly successful foreign exchange market-making team at GSA Capital, which used advanced technology to capture market share.

Gerko decided in 2015 to spin out his business from GSA after a period of significant growth, rebranding the independent group as XTX Markets. As well Amrolia, other big hires include Mike Irwin, who joined from State Street as chief operating officer, and Jeremy Smart as head of sales from Royal Bank of Scotland.

XTX provides liquidity across equities, FX, fixed income and commodities, and it now has 67 employees and an average daily volume of $ 75 billion. In the Euromoney FX rankings, which banks have long used to benchmark their success, XTX this year became the first non-bank to penetrate the top 10, with an estimated market share of 3.87%. This put it in fourth place for FX spot and ninth place overall, just a shade below HSBC and ahead of Morgan Stanley in 10th place.

Amrolia said: “The business model is really efficient – we don’t have voice traders and we differentiate ourselves from the HFTs by holding risk, with tighter pricing than traditional players typically provide.”

While HFTs have often been criticised for zipping in and out of markets in milliseconds and jeopardising orderly market functioning, XTX says it holds positions for at least 10 minutes in Group of 10 currencies and 20 minutes in emerging market currencies.

It may be more committed to liquidity provision than a standard HFT, but XTX’s differentiation is still tightly bound up with its technology, something that has been close to Amrolia’s heart throughout his career. He was an architect of the Autobahn platform that became the engine of much of Deutsche’s success in forex, and was later tasked with extending the bank’s expertise in e-commerce across fixed income.

Amrolia said: “Technology can be used in numerous ways. Many banks are burdened by large fragmented infrastructures that are 20 years old, while HFTs have very fast hardware and private microwave networks and technology to transact orders very quickly. At XTX, we differentiate ourselves from this, having invested entirely in our market-making research software to deliver the best prices on a consistent basis.”

Since taking up his new role, Amrolia has been instrumental in giving XTX a more prominent industry profile.

He joined the Bank of England’s FX joint standing committee this year, while Gerko has participated in the market participants’ group that has provided industry input into the drafting of a global code of conduct for the FX market.

Amrolia said:“We don’t actively lobby and we would like to think we are active in promoting fair and efficient markets, as we understand the complexities of liquidity provision that clients, banks and non-banks are facing in this changing market environment.”

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