FOCUS : New technologies: Shaping the future of e-FX

First Published in e-Forex Magazine October 2007

Nicholas Pratt

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.

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The FX market has a reputation for lagging behind other markets in terms of the development and deployment of new technology. In many ways this is down to the structure of the FX market. Traditionally it is the big banks that have driven innovations in the FX market, however the developments of the last five or so years - the emergence of online multi-bank portals, a booming retail market, more high frequency trading and a general desire for low latency transactions - have shown signs that this pattern may change and the pace of technology innovation and adoption might quicken somewhat.

So with this in mind, what are the technology developments to look out for in the next year? Where is new technology emerging and what impact will it have on trading strategies and volumes? Are new participants bringing new technology with them? Has the huge growth in trading volumes instilled more urgency in the technology vendor market? Or is there now a larger gap than ever before between customers' needs and the technology available and, if so, where are these pressure points appearing?

For many, the 'new' technology adopted in the FX market will simply be what has existed in other, more technologically developed markets such as equities. "I don't think there is any need for brand new technology," says Viral Tolat, chief technology officer at Integral, provider of FX Inside (a direct market trading service) and FX Inside Plus White Label Private Trading Exchanges. "There is a whole host of technology out there that can be applied to FX to reduce latency and execution times as well as providing broad access to a highly distributed segmented market."