Time-to-Market: How Flow Traders Beat the Competition
When it comes to day trading in the stock market, every second can be the difference between a huge profit and a huge loss. Especially when it comes to High Frequency Trading where every millisecond is of enormous importance. This is true for investors but is of even greater importance to Market Makers. The Time to Market is Key! This applies to any organization that wants to win!
Speed is an important element of Success!
Recently we posted a message about Tesla. The automaker already has a huge lead in the market and wants to use this advantage to eat (almost) all Profit Pools from the market. CEO Elon Musk announced that Tesla wants to bring a car to the market within 3 years that costs less than $25,000 with a battery that is smaller, has more range and is more durable than the current battery used in the car. This while the car industry is still working hard to keep up with the first generation of Teslas. You can read the whole article about Tesla here: The secret of Tesla. Your organization can do this too!
The Time-to-Market is therefore extremely important
As indicated earlier, especially in the stock market. Flow Traders is Dutch proud when it comes to the Time-to-Market. Flow Traders is not so much about High Frequency Trading. Flow Traders is a Market Maker. This makes not only the Time-to-Market important, but also the scalability of the operating model and the price range of the products.
Data centric, scalable and act on the millisecond
Flow Traders works from a data-centric platform in combination with the latest technology. Their algorithms handle the data they receive so efficiently and quickly that their Time-to-Market is very short. They act on the millisecond.
When investors buy something on the stock exchange, they often buy the product from Flow Traders. The Market Maker offers the best prices compared to competitors. Flow Traders can only do this through the combination of speed and scalability of the operating model. How is it possible that Flow Traders can offer a sharper price than other parties?
Flow Traders can offer its products faster and sharper because they cover their market risks. That only works because they have a large market share. On the German DAX index, Flow Traders claims to have a market share of more than 30%.
CEO Dennis Dijkstra says to the FD: “You cannot make it with a market share of 5%.”
Precisely because they cover risks efficiently and cheaply, Flow Traders can quickly offer its products with competitive prices. Acting on the millisecond is therefore essential.
Flow Traders’ operating model is so scalable that they can quote prices for thousands of products on more than 200 different exchanges and platforms in Asia, Europe and North America.
Value creation through data centrism
Although Flow Traders often receive negative reactions about their working method (because if you earn money in the Netherlands, you are often seen as a moneylender), they do not work very differently from large Market Makers such as Goldman Sachs and other global players. They all have the latest equipment and the best algorithms to transfer information around the world as quickly as possible. Just like with Tesla, we see that the entire organization is data-centric. An essential step in Digital Transformation 4.0 to join the world top.
Flow Traders does not have endless IT legacy systems or redundant data spread across multiple systems. They work completely data-centric with a flexible and scalable operating model. In a world where operating costs are high and margins (between bid and ask) are getting smaller, Flow Traders managed to make a profit of €262 million in the first quarter of 2020! This while the stock market fell more than 35%.
Investing with results
The success of Flow Traders does not come out of the blue. Significant investments have been made in advance. Hundreds of millions of euros have been invested all those years to be able to participate in the world top. The result may well be there!
The investment has largely become self-financing as they allow cash flow to flow over their data-centric platform. This is something that we at FutureXL want to make organizations aware of. Building a super flexible and scalable data-centric operating model as the basis for new business models, which act as cash flow engines that generate a lot of value. This is essentially what Digital Transformation 4.0 is about.
Although the maximum speed for stock market trading now seems to have been reached, the future looks bright. With Artificial Intelligence and Big Data, Flow Traders will maintain and further expand its market position, but the real strength lies in the development of Blockchain and Quantum Computing. Acting on the millisecond will then quickly transition to acting on the nanosecond!