e-Forex Magazine | Features | Delivery, processing and storage: key advances in FX data management
Features : Delivery, processing and storage: key advances in FX data management
First Published in e-Forex Magazine July 2008
Nicholas Pratt
The foreign exchange market has always considered itself special and quite unlike other asset classes. The over-the-counter culture, the reliance on age-old relationships between price-givers and price-takers, the instinctive approach to trading behaviour they are all long-held traits that, even in a time of momentous technological change and transformation, the long-term participants have sought to retain. Some of this is down to the conservatism of many of the traditional FX participants the types that resist any radical changes, adhering to the maxim that the markets have operated in the same way for many years and will continue to do so. If it is not broken, then do not fix it. However, as the statistics from the Bank of International Settlements triennial survey into FX volumes will testify, there has been an increasing number of new participants entering the FX world, bringing with them their own expectations and demands and little awareness of or respect for the traditional way of doing things.
Back five years ago, when this trend began to gain momentum, the most notable characteristic of the FX market to these newcomers was the paucity of market and pricing data available to them. And for buy-side money managers or high-frequency hedge funds, this data is critical. But such is the character of an unregulated and over-the-counter market like FX that it lends itself to a situation where, historically the dealers owned the data and wouldn't give that pricing data to anyone but other dealers.
Consequently the FX market was dominated by the interbank market, a dynamic that was altered by the emergence of sophisticated and aggressive hedge funds and buy-side money managers that had previously been wholly dependant on what their prime brokers would offer them by way of market data and pricing data subsequently demanded direct access to the interbank platforms and demanded streaming prices from the dealers and the platforms.
Up until this point, the investment banks dealing in the FX market had their own pricing data and that of their counterparty banks. Platforms like EBS, now owned by ICAP, and Reuters, now half of Thomson Reuters, also had their own pricing data but none of this data was made more widely available beyond the interbank market or to anyone but a dealer, despite the demands of the hedge funds who were basing their high-speed, high-frequency trading strategies on reliable and rapidly delivered market and pricing data.
