In the past year JP Morgan began offering clients a cocoa arb via its e-trading platform. Filippo Finelli, global head of commodities automated trading strategies (ATS), and Sandy Sehmi, commodities e commerce product head, discuss how this is part of their broader effort to bring more automation to commodities trading. Profit & Loss: So tell […]
Goldman Sach’s David Wilkins, global head of e-FX sales, and Ralf Donner, head of client FX algo execution, talk about a new algo launch that they claim offers a new way to trade FX. Profit & Loss: So tell us about the new algo that you recently made available to your clients. David Wilkins: It’s […]
Over the years the most powerful criticism aimed at e-commerce and its potential impact on markets has not been about volatility, or market behaviour generally, it is its lack of flexibility – why else, for example, has the FX swaps market not become more automated in recent years? This is a genuinely intriguing question and whilst in the past it was hard to see how it could happen – thanks to resistance on bank and broker side – now I am definitely picking up a different vibe.
The increasing automation of the FX markets is changing how firms manage their risk, said speakers at the Profit & Loss Scandinavia conference in Stockholm in October 2018.
Marian Micu, director of quantitative research at Qube Research and Technologies, highlighted the emphasis on new technology and automation in trading by pointing out that five years ago he had no machine learning specialists on his team and that now over half of them are machine learning traders or researchers.
Micu went on to explain that in the past, news that was likely to impact prices in the market mainly came from scheduled announcements from sources like the European Central Bank (ECB) or the Federal Open Market Committee (FOMC), and that such announcements could be very well monitored and understood by a team of human traders and then integrated into the trading strategies.
In an environment in which liquidity has become increasingly commoditised, how do FX trading platforms offering access to this liquidity differentiate themselves?
This was the question put to Jill Sigelbaum, head of FXall, Refinitiv, during a recent video interview with Profit & Loss.
Sigelbaum responded that providing transaction cost analysis (TCA) and pre-trade analytics tools are examples of ways that platforms can offer increased value to clients, but also highlighted a number of other services that are being developed.
“What really differentiates us, and I think how we move forward, is the pre-trade workflow, the artificial intelligence that we plan to use around analysing the post-trade data so that we can make suggestions to clients, automating the process as much as possible without actually trading for our clients,” she said.
This week’s podcast was delayed because Galen Stops had difficulty connecting from Peru…that or the fact that our podcasters were intimidated by the quality of their guests the previous week and knew they couldn’t match the standard!
They overcome the fear factor, however and go on to discuss the local market in Peru as well as the broader issue of NDF market development, during which Colin Lambert thinks he sees positive signs coming out of Asia regarding electronification of these markets.
FX markets are largely seen as mature in terms of market structure and technology, but what about fixed income markets? Colin Lambert talks to Steve Toland, founder of TransFICC about the complexities and challenges involved in modernising these markets.
He finds that while fixed income markets are behind FX markets in terms of market structure and automation, they are catching up quick, but the biggest challenge is the sheer breadth and complexity of products traded – often on the same desk.
The FX industry is a vibrant, innovative place, but sometimes I think it forgets why it exists. This amnesia means as an industry, FX does not respond sufficiently on those occasions when people with no understanding of the nuances of the business suggest “improvements”.
So many news threads running through the industry at the moment seem to be idealising a totally transparent, all-to-all trading environment. This works in domesticated markets like equities, but it doesn’t work in global, institutional markets like FX – especially when we remember why we are here.
As the FX market becomes more automated and continues trading faster, the industry needs to implement better controls to prevent disruptive behaviour, says Greg Wood, SVP, global industry operations and technology at FIA.
Drawing on his experience working in both the FX and futures markets, Wood observes that both are fundamentally driven by technology now and are highly automated.
He adds that “with any type of automation you’re going to have increases in speed and your controls have to maintain pace with the other increases in technology, so as the market gets faster, you need to have appropriate controls.”
Technological developments present new challenges to both financial services firms and their staff, warned John Ashworth, CEO of Caplin Systems, at Forex Network London.
In a presentation “The Fourth Industrial Revolution: Society, Finance, Trading & Sales”, Ashworth opened the discussion by questioning the assumption that the advance of technology is unambiguously good for business.
“The notion that an entry level economist would invite you to believe is that technology is a good thing, that technology delivers productivity, that productivity delivers advancement, that opens up new markets, and so forth. The reality is somewhat different,” he said.