From The Management
How has technology changed the dynamics of FX trading
The merging of the home and workspace is a direction we have been travelling towards for a while, especially when markets became truly 24-hour affairs. With skyrocketing trading volumes, participants need technology to react swiftly to market changes that occur outside standard office hours. Besides secure access, speed of access and reliable performance are also essential to keeping funds intact in the event of unexpected news in the middle of the night. Remote logging into work computers from home is possible but prone to performance issues, and without an Infosys team on standby, it becomes necessary for office trading systems to penetrate the home. reliance on technology is greater than ever.
Raising value via automation
There has been a fear of automation rendering humans obsolete in workplaces; however, in the case of financial services markets, I do not think technology can replace the instincts and experience of a good trader or the excellent service that many forward-looking liquidity providers (LPs) provide to their clients. Instead, I believe backend automation opens more possibilities for traders by enabling them to concentrate on providing the most value whenever and wherever they are. Flexible yet controllable automation is the key: automated minor, routine processes save you time and energy, but also provide oversight and control if something goes wrong.
One aspect where automation makes a significant difference is in preventing information leakage. While often framed in terms of last look and stream versus Request for Quotes (RFQ), the fundamental problem is really about telegraphing your intentions to other entities ahead of completing execution. In FX markets, there is a unique dichotomy where the entity that is traditionally used to ‘leave instruction’ for a trade is also the ‘counterparty’ to the trade. That is a bit like asking a lion to look after a meat store. There were few alternatives to manual execution in the past, but now, traders can use an automated solution that works stealthily across all available LPs 24 hours a day.
Streamlining with web technologies
What is perhaps most interesting is that there are now technologies available that make a commonality possible between different systems using similar web-based technologies; a secured ‘bus’ that can be used for applications to communicate with each other. Such technologies offer the prospect of integration and communication happening across applications on the desktop without the need for the traditionally large, backend project that often involves bespoke connectivity, software integration and complex security considerations.
Tapping into mobile technology advancements
If we think about it, it is amazing that despite financial centres having to shut down more or less overnight due to the pandemic, we can continue trading and running complex strategies without missing a beat because of all these different technologies and solutions. Zero downtime in some of the choppiest market conditions we have ever seen; this is something that would have been completely unthinkable just 10 years ago. I think I speak for all my colleagues – in the widest sense of the word – when I say that I personally am proud to have had a very small part in enabling that to happen.
This article first appeared on TabbFORUM: Currencies & Commodities Opinion & Analysis