As we approach the end of the year I thought I would share 10 observations with you. These are based mainly upon themes this column has covered over the past 12 months but there are a couple of newer thoughts.
1/ Be careful when naming things. I was amused to read of an execution management system called Front Runner recently, but the smile was wiped off my face when this perfectly legal software was overlaid with the ongoing scandal over the Fix…on which note, The Cartel…Really guys?
2/ My long standing abhorrence of fixes is well and truly justified.
3/ Twitter trading doesn’t work, but blindfolded monkeys do.
4/ The CFTC has landed America in a difficult position with its insistence on extra-territorial access to information – a position that could impact the US’s standing beyond financial markets.
5/ The financial markets industry cannot afford to be lax in its opposition to the FTT, anyone considering laxity should refer to point 4.
6/ Don’t steal code when changing jobs – people are going to jail for this now.
7/ Exchange trading can be the future – but the core infrastructure needs to be better, there have been too many exchange-related glitches in the last two years.
8/ I like the term “dusk” to describe the nature of the ideal liquidity pool – it’s not dark, but neither is it light. Both sides are protected.
9/ HFT, and not just outside the banking industry, is still a challenge. Witness the increased use of predictive technology associated with interest only feeds, not to mention how latency arb is still alive. I recently spoke to a player who reckoned to turn over yards of FX a day – what was their daily stop loss limit to shut the program down?
*answer at the end
10/ Things may look bad in the FX industry, but they’re not. They’re just changing quicker than many anticipated which means opportunity abounds. The structure is the same, some of the names/jobs are changing.
Most of the above can be read by using an appropriate word in the search engine on P&L’s website, I’ll be back later this week with the last column of the year.
*Speaking to a trader recently I was informed they executed “yards” of FX each day and their daily stop loss was $2,000. Yes, two thousand dollars. It had, at that time (September) been shut down three times this year. If there was a prize for remaining straight-faced in the midst of absurdity it would have been won here, for the person concerned assured me the program had nothing to do with either latency or arbitrage.
Colin_lambert@profit-loss.com Twitter @lamboPnL