THETRADETECHFX DAILY from the floor
“ I think with the T + 1 settlement cycle change confirmed and en route for various markets , as well as the T + 0 FX conversation well underway , we ’ re approaching a bit of an inflection point between really testing the boundaries of ‘ traditional ’ finance infrastructure , versus where there may be a tipping point that only going digital e . g ., DLT might be able to solve .” for the US market , it feels like it won ’ t be long until we as an industry need to take even bigger steps in the efficiency department .
What advancements in the FX space are being made to enhance operational efficiencies and reduce costs ? Increasing use of electronic trading and automation or ‘ rules-based ’ trading continue to help us as buy-side traders on this topic . The evolution of these types of execution solutions , combined with a huge push in the trading data space , have really helped improve the ‘ tool kit ’ we have at our fingertips , when assessing what we have on the pad to get done throughout the day . Automation and eFX trading have been invaluable in helping us execute large numbers of smaller ticket-size trades in an efficient manner , allowing time to really focus on executing the larger / trickier orders in the best way possible on behalf of our clients . We know AI-based technology will likely also bring tremendous change in this area , but what that looks like remains to be seen .
Additionally , the time savings have allowed us to begin looking at other asset classes on top of FX , with a view to becoming a more dynamic team of traders who are able to cross-cover each other on the desk . This will become increasingly important as we move to a cross-location team once our US desk is established , as we implement a more follow-the-sun type model . Likewise on the data side of things , we have a trading data analyst who sits with us on the desk – who ’ s able to both help us focus on execution by addressing any trading-related queries from clients ; and also provide us with a plethora of data insights , sprinkled with appropriate challenge , to help better inform our execution decision-making .
How do you expect FX market structure to evolve over the next few years ? This is an interesting one as I think with the T + 1 settlement cycle change confirmed and en route for various markets , as well as the T + 0 FX conversation well underway , we ’ re approaching a bit of an inflection point between really testing the boundaries of ‘ traditional ’ finance infrastructure , versus where there may be a tipping point that only going digital e . g ., DLT might be able to solve . There are many strands of conversation which could sprout from there – such as technological lift involved , regulatory requirements , as well as just general comfort level and willingness of the broader industry to head down a more ‘ real-time ’ road at scale ; though it ’ s likely the decision could be forced down the line , via regulation . I would think we ’ re still maybe a few years out from there yet , so that ’ s probably slightly longer term ; however , in the meantime , it ’ s also worth staying mindful that T + 0 is a separate ( though linked ) discussion to atomic settlement , which is an equally interesting prospect coming down the line . I think for now we can expect continued evolution of eFX trading , use of automation to enhance trading efficiencies , and general compression of FX processing timescales . To round off on-topic though , I do think there ’ ll be various impacts to FX markets as a result of the incoming wave of T + 1 settlement cycle moves – some of which we ’ ll likely not know of until this is live . In the meantime , I look forward to being part of the change .
The official newspaper of TradeTech FX Europe 2023 TheTradeNews . com 25