Market players believe Bank of America has pulled off a shrewd move with its takeover of Financial Labs, a specialist in algorithmic-driven pricing and trading.
FinLabs is a trading firm based in Cambridge, Massachusetts, staffed by a team of mathematicians and astrophysicists. One market participant says that FinLabs has a market-making program that sends many bids and offers into the various liquidity platforms that make up the FX market. When it trades, it immediately switches to the other side of the deal and it is said to capture the bid-offer spread repeatedly throughout the day.
Christiane Mandell, global head of foreign exchange for Bank of America, says: “This acquisition is another important step in achieving the overall growth plan we have set out for Bank of America’s foreign exchange platform.”
She adds: “The team of physicists and astrophysicists that are the core of Financial Labs have established themselves as leaders in high-frequency trading. Their expertise meaningfully enhances our ability to provide automated, efficient pricing to our clients and continually deliver world-class market making.”
Acceleration
This all seems a world away from the days when cable traders in London took positions depending on whether the tide was in or out in the River Thames. No doubt it will prove far more successful, even if not as much fun.
Scott Freeman, BoA’s head of electronic trading services, says the bank intends to leverage on FinLab’s skills. “The FinLabs team is a unique group of people, who have great experience trading high-frequency FX and we believe we can leverage those skills for price setting and risk management.”
Algorithmic trading, which has had a large impact in other asset classes, is a hot topic in FX at the moment. Many believe that it will have the same impact in currency trading as it has in other asset classes, and that the use of algorithmic programs will start to accelerate rapidly in the near term.