Nicholas Pratt examines the issues shaping FX brokers use of liquidity management services and how they can be the difference between success and failure in an increasingly competitive market.
TCA is still nascent in the FX environment but as Dan Barnes discovers, it has the potential to leapfrog development stages found in equities.
With acquisitions and new launches, the FX ECN market is abuzz with activity. Nicholas Pratt examines the developments and what factors will decide the fates of the various players, new and old.
FX market firms are seeing a growth in trading volumes that is leaving their trading infrastructures struggling. Dan Barnes explores how, as legacy technology struggles to cope, new big data systems offer faster, more reliable processing power.
While FX prime brokerage is already a growth area, the added complexity of mandatory clearing for NDFs and FX options is likely to give the segment another boost as those drawn into clearing consider the benefits of a prime broker. Frances Maguire looks at what is in store.
The introduction of centralised clearing for OTC instruments is heralding a major re-engineering of technology. Trading infrastructures are being re-designed to support it and banks are investing in new systems to facilitate improved front to back-office transaction processing and risk management. Systems upgrades are also being undertaken to handle the new margining requirements and collateral management, Frances Maguire explores how all this activity is creating a demand for a new generation of trading and risk management systems, based upon innovative and highly scalable technology architectures, as clearing providers start thinking about how to differentiate their clearing offerings.
Frances Maguire talks to a selection of leading banks about how they are differentiating themselves and adding value to their e-FX platforms in a maturing, but still increasingly competitive, market place.
Opportunity is essential to any trading strategy but, as Nicholas Pratt explores in this article, what sets high frequency trading apart is the speed at which these opportunities are discovered and the speed at which the resulting trades are executed. All of this has been made possible by technology, both the provision of it and the lack of it, for it is the disparity in the extent and sophistication of technology that first presented the kind of opportunities that saw high frequency trading blossom in the FX world.
Nicholas Pratt explores why increasing numbers of both Retail and Institutional FX traders are being attracted to the transparency, speed, as well as trade execution and cost benefits of ECN trading platforms.
The FX options market is the worlds largest and most liquid options market, and while a small fraction of contracts are traded on the exchanges, most of the FX options volume is traded in the OTC market. But with the regulatory spotlight on the OTC market, and the likelihood that clearing FX options through a central counterparty (CCP) will become a mandatory requirement for banks, Frances Maguire explores where we currently stand with the electronic trading of FX options and whether a rethink is needed about how they are traded and processed in the future.
While previous efforts to deal with the complex and convoluted connectivity issues associated with Post-Trade FX may have occasionally hit the buffers and failed to deliver the anticipated cost savings or the efficiencies required for the market to move to the next stage, evolutionary steps continue apace. Roger Aitken gauges industry opinion.
Technology within the financial markets does not stand still for very long and, despite the advances made in electronic trading and execution in the FX market, the next stage of development and the building of a new breed of trade execution platforms are well under way. Nicholas Pratt explores some of the ways that these developments are taking place and what expectations banks and brokers have of their platform providers.
The events of the past 18 months have put credit firmly in the spotlight, giving rise to a new round of product innovation within the FX Prime Brokerage space. Frances Maguire explores how it has also raised the ante on improving customer service levels amongst the leading providers.
The concept of 'Direct Market Access' (DMA) is a simple one and is yet another example of an invention that started out in the equities market and is now being adopted in the FX market. Nicholas Pratt examines the evolution of DMA and what it means for FX traders
If what you see is truly what you get then it is little surprise that traders are investing heavily in FX aggregation. But, says Nicholas Pratt, with such a wide variety of products on offer, how do traders pick the most appropriate solution?
FX margin trading and the subsequent need to manage collateral has become very much in the spotlight in recent times as the cost of credit becomes more prohibitive and firms seek to squeeze greater efficiency from their bottom line.
In recent years, the FX market has witnessed the emergence of a new trend in electronic trading: algorithmic trading strategies designed to capture execution opportunities in increasingly automated and fragmented marketplace. This article examines the changing market reality in the FX market, assessing the potential for growth in adoption of FX algorithmic trading, as well as identifying possible pitfalls.
Despite the current budgetary constraints, the difficulties in improving post-trade processing for the spiralling number of FX tickets is still tempting the banks and FX trading venues to build rather than buy. Frances Maguire looks at the choices involved.
While the recent financial turmoil continues to reshape the financial markets, indications are that counterparty risk will come under the spotlight, along with the need for greater transparency. For these reasons, it is expected there will be trend away from over-the-counter (OTC) products towards standardised exchange-traded listed products that bring with them the benefits of central clearing to mitigate risk counterparty risk and greater automation that lowers operational risk.
When it comes to exchange connectivity it really is a case of horses for courses as there are a myriad connectivity options available to traders, depending on their type of business and how much they are prepared to invest to lower latency.
FX trading has traditionally been conducted over interbank and inter dealer networks. But in recent years, with the emergence of exchange based electronic trading technologies and the benefits of the centralized clearing and risk management, traditional derivatives exchanges (ex: CME, ISE, ICE Futures, USFE, and NASDAQ OMX PHLX) are becoming significant market places for exchange based FX derivatives.
Liquidity Management, as it relates to financial services companies, is a topic that has received a growing of attention in recent months. New reports, from TABB, AITE, Financial Insights and ClientKnowledge, examine Liquidity Management solutions being considered by various institutions and document some of the early adopters in the marketplace. These reports discuss the explosive growth of interest in this area and describe an overall approach to Liquidity Management in the context of managing transaction flows and cash positions throughout the enterprise.
The FX market has changed considerably since the advent of electronic trading. While such a development has been clearly beneficial to the market and all its participants by instilling more efficiency into the process, reducing operational risk and allowing for greater volumes to be traded, it has opened a Pandoras Box in terms of liquidity.
Liquidity aggregation has become a vitally important trading tool for buy-side FX firms. The decentralised, segmented and over-the-counter nature of the FX market means that liquidity has always been dispersed but in the last ten years the number of sources from where liquidity can be sourced has increased enormously. Consequently the importance of liquidity aggregation solutions tools that enable FX traders to view all of the various sources of liquidity on one screen has increased accordingly. This has obviously led to an increase in the number of solutions being developed and made available to buy-side firms.
Foreign exchange (FX) is a commodity, traded both spot and forward. It is the most liquid, globally traded commodity, available nearly 24x7. FX is traded over the counter (OTC) in more locations than any other commodity or financial instrument. Facilities now exist for all classes of investor to buy and sell foreign exchange electronically as a commodity and packaged as a financial instrument, such as an exchange traded fund, mutual fund, or contract for differences
Where would we be without rules? At the time of writing Europe is in the middle of its four-yearly football tournament where once again controversy is raging over the persistently enigmatic offside rule which was originally designed to make the game a more attractive spectacle and now serves to fuel post-match arguments between rival fans. This debate, which has raged for decades, traditionally centres on the lack of consistency in applying this rule. The room for interpretation is too wide, leading to these inconsistencies and the accusation that it may be one rule for one and another rule for the others.
Frances Maguire asks if the FX industry will ever successfully trade FX options electronically or if the hybrid model is here to stay.
Frances Maguire looks at whether the exchanges are succeeding in attracting both retail investors and quant funds to trade FX on-exchange.
The growth of electronically traded FX options by retail traders, both over the counter and on-exchange, is already taking off as more sophisticated retail investors look for new trading and hedging opportunities. In response, brokers and banks are rapidly developing e-FX trading platforms that support and educate investors about the different products and trading styles available, and FX options is being pitched as the fastest growing new revenue stream in FX.
The recent sub-prime crisis has sent the worlds financial markets into a period of volatility and uncertainty not seen since the last decade. Nicholas Pratt takes a look at what implications this has for Risk Management practices.
Paul Ronan discusses the increased transparency and efficiency of the market as a result of greater access to information and the adoption of technologies that allow participants to employ trading strategies via black boxes.
Wolfgang Koester outlines why companies who continue to ignore their companys foreign exchange exposure management processes will have to answer for them once today's currency-related profits have turned into unforeseen losses.
With both buy-side and sell-side firms finding themselves facing a new set of technological issues related to high volume FX trading, Harrell Smith looks at the challenges they face in implementing effective, real- time risk management solutions.
Nicholas Pratt looks at why the pace of technology innovation in the FX market may change as a result of the emergence of online multi-bank portals, a booming retail market, more high frequency trading and a general desire for low latency transactions.
Chris Donnan explains why many vendors have begun to focus on what event processing has to offer for FX trading participants.
Foreign exchange is the most inclusive of financial markets and has used technology to lay out the welcome mat to all-comers. Initially the preserve of the inter-bank market, electronic platforms have been developed for corporates, asset managers, hedge funds and now retail investors. In democratising foreign exchange, the banks have set themselves the challenge of supplying liquidity to multiple market sectors competitively, while the buy-side has been quick to realise that best use of technology a critical factor in obtaining best price.
The FX industry is unique compared to other asset classes in that it has an unparalleled level of fragmentation and segmentation and simply so many ways of doing things. Similarly there is a huge variety of participants in the market, all with different motives, from the high frequency hedge funds looking for arbitrage opportunities among global currencies to the corporate treasurers needing to pay bills in various currencies.
Today’s banks are facing a strong and growing interest for enhanced online trading solutions from all client segments. Clients – from funds using algorithms to smaller corporate and private traders – are increasingly seeking broad, multi-asset coverage, and cross-asset trading capabilities to deliver real-time, executable prices at lightning speed.
Nicholas Pratt examines what prospects todays leading emerging markets have to become an efficient and reliable online trading market place.
Frances Maguire discovers how banks are using their own regional expertise to rapidly expand their e-FX services in key emerging markets.
FXPB expectations: views from the client-side
A major driver for growth in FX prime brokerage has been the hedge fund community and Frances Maguire investigates what they are looking for from their prime brokers.
Andy Coyne tells us why there are still a great many clients looking to their FX Prime Brokers to provide them with greater levels of support and value.
Stephen Swindon looks at how prime brokers are increasingly looking for ways to take a bigger share of the market and differentiate their offerings.
Jesse Drennan examines how automation of prime brokerage operations has created an IT overhead for fund managers and provides a solution to overcome the problem of competing protocols.
Louise Westerlind looks at why the timing is now right for the FX market to clean up and better manage FX data.
Next generation Push: a viable technology for web-based FX market data delivery