After a good January, March is shaping up to be, much like February, a pretty ropey month for many in the foreign exchange industry, and this is manifesting itself in the form an increasingly louder debate about the lack of volatility. I saw this week one publication suggesting that FX markets need “a proper crisis” to get things moving, but I am not even convinced that will do it. The sad reality for those seeking livelier markets is that this is probably your new ‘normal’.
The Bank for International Settlements’ Markets Committee has released a report by a recently-formed study group, which looks at the evolution of what it terms fast-paced electronic markets, focusing mainly on spot FX, and the challenges this evolution has for central banks.
The report says the market structure changes have implications for central banks’ approaches to market monitoring, including the range of participants with which they engage, the types of data they collect, and the tools and technologies they utilise.
The increasing use of AI technology is likely to create incumbent firms that dominate markets, said panellists at the Profit & Loss Forex Network New York conference. However, they also said it might not be the biggest firms in the markets today that become these incumbents.
“I think [AI] is changing the landscape quite a bit,” said Andrej Rusakov, a partner at Data Capital Management, a hedge fund that uses AI tools to develop trading strategies. “People who are missing the wave are going to be left behind, I don’t think there’s any question about it. I think that human day traders will be wiped out, if they’re not already.”
Transaction Network Services (TNS) is expanding its managed hosting, co-location and connectivity service to New York and Chicago.
TNS’s new solution, already launched in Europe and Asia, is aimed at low latency trading firms looking to access key equity, derivatives and FX markets.
The service is designed to allow these firms to enjoy the benefits of proximity co-location, such as ultra low latency exchange access and client cross connects, without the high cost and complexity of researching, procuring, installing and managing trading infrastructure themselves.
In a speech on Friday, Chris Salmon, executive director, Markets, at the Bank of England, discussed the changing market microstructure, in particular the advent of “fast markets” and stressed it was “incumbent” upon authorities to keep up.
Salmon highlighted three recent flash events in financial markets, the equities market flash crash of 2010, the US Treasuries flash rally in 2014 and last year’s Cable flash crash and while he observed that sharp moves in asset prices are nothing new, “the speed, and the typical near-total reversal” is new.
Colin Lambert has retrieved the trusty Profit & Loss Crystal Ball from the dark recesses of the office, given it a wipe, and peered into the future to produce 10 predictions for 2017.
There is little doubt that as an industry foreign exchange is a more optimistic place than it was just 12 months ago – and hopefully the majority of themes in this year’s Crystal Ball reflect a more upbeat message.
es, the coming year will not be without the challenges of legal battles that have dogged the industry for the past three years, but if nothing else the shock factor has worn off and most people see what is happening as the continuation of a long process.
This week’s Bundesbank paper on HFT in bund and equity markets caused a stir – as anything on this subject does of course – and it highlights to me again, how FX is in front of other markets in being inclusive and functional. It is significant that while some regulators want FX to be equities-like in market structure, more are looking to an FX solution – the speed bump – to save equity market problems.
I am not sure we should be talking about speed bumps for the real issue is the dysfunctional liquidity stream.
Market sources are reporting a flurry of trades in the seconds leading up to the release of the latest Reserve Bank of Australia (RBA) monetary policy decision today. The sources say that price action on at least three multi-dealer venues preceded the announcement that the central bank had cut its key interest rate by 25 basis points to […]