Beyond STP: The next generation of eFX integration
Harpal S. SandhuCEO Integral Dev. Corp
Harpal Sandhu outlines how by leveraging on-demand data and service
grid technology, FX market participants will be able to better
manage their businesses.
Over the last several years, even casual industry observers have
taken notice of the evolution and change in the FX industry,
brought on by overall volume growth, technology and shifting market
dynamics. And if the first several months of 2006 are any
indication, then we can safely say that the pace of change is
Notable events that have recently shocked the industry include the
sale or pending sales of some of the largest multi-bank portals:
Hotspot, FXall, and EBS. Industry change will no doubt increase as
the global liquidity providers evolve their approaches to the
To successfully manage and grow FX businesses in this new
environment, industry experts recommend even more emphasis on
technology and risk management. Flexibility to adapt is critical,
and underlying systems must be efficient and nimble, allowing rapid
connectivity with trading counterparties as industry players and
However, even with advancements in technology, integration of the
many internal and external systems between these counterparties
remains a huge challenge.
Integration the $64 billion
Think of the many steps of data exchanges in negotiating, executing
and processing an FX transaction. By many accounts, this is a very
complex and messy integration problem, compounded by rates that are
updated literally thousands of times per second.
To manage these processes, intensive integration with APIs and
system feeds from multiple sources are required. The problem?
Some feeds are up, some are down, and do you know which ones have
problems and how often? Prices arrive in diverse methods and
formats, such as multi-tier, request for quote, request for stream,
and executable streaming. Some venues are order driven, while
others are quote driven. Stale, latent or bad prices can throw off
order books for entire currency pairs. The list of integration
challenges is long and constantly changing.
Even if a financial institution has invested heavily and solved
these integration issues, costly resources must be dedicated on an
ongoing basis to manage the various systems and changes that arise
as trading relationships, APIs, and technology platforms evolve
over time. Also, if there is a need to change or connect to new
liquidity providers, portals or customers, investments in further
integration such as writing to and managing new APIs is required.
For most institutions, this type of IT resource and expertise is
not in their core competency and is no longer feasible.
Enter The Grid
One answer to this integration-intensive problem for the FX
industry is to leverage an emerging technology: market specific
data grids, to deliver business value quickly and reliably by
pooling resources into a single set of shared services amongst
trading relationships. Ultimately, turning an integration-intensive
need into an on-demand service.
While other industries have spent billions of dollars building this
type of core infrastructure (telecom, travel, electricity, etc.),
the opportunity to do the same for FX is the next frontier.
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