Max Boonen, Founder and Director at B2C2, one of the world's largest OTC liquidity providers, told The Block in the latest episode of the Scoop that the young company’s competitive edge lies in its ability to offer their clients tighter pricing than its competitors.
“We're really good at understanding the business model of our clients so that we can show them the tightest pricing possible with respect to their business model,” he said.
Established providers such as Cumberland and Circle struggle with clients like quant funds, which have alpha models that tell them whether the market will go up or down on the horizon of five minutes, Boonen said. This doesn't allow them to hedge fast enough for their clients to make money. Therefore, if a provider has a user base consisting of long-term investors or retail traders who do not know how the market will perform in the horizon of 50 milliseconds, it makes more sense for those clients to search for a new OTC equity provider for better pricing.
“Trading with smart clients who have a horizon that doesn't overlap with yours as a market-maker is really something that we've nailed at B2C2,” Boonen said. “And that means we can trade with people that our competitors don't dare trade with.”
At B2C2, he said, the company has aggregated a considerable trading flow from quant funds, retail aggregators as well as simple family office punters. This diverse client base has enabled the company to internalize the flow within a few seconds.
“When you're able to have a lot of OTC flow two-way from a diverse client base, then you really start to have a pricing advantage because you don't need to ever go to the exchange to hedge anymore,” he said.