FX mobile trading devices go through growing pains
Although use of mobile devices to place FX orders is growing steadily among retail traders, demand from sell-side institutional traders has stalled because of compliance and functionality restrictions.
In 2012, a Euromoney survey indicated that only 21% of buy-side professionals used a mobile device to monitor orders and positions and just 14% used a mobile device to place orders or execute trades. Two years later, 46% of buy-side professionals polled by Caplin, a financial trading technology provider, said their firm engaged in mobile trading with their bank.
|Patrick Myles, Caplin|
However, more recent research conducted by Caplin suggests that provision of mobile services by sell-side firms has stalled and that, apart from a few large early adopters, many on the sell side (particularly the large regional banks) are still hesitant about offering full-featured solutions.
Caplin CTO Patrick Myles attributes this to perceived lack of demand from clients and cost pressure. He says: “Regulation is dominating budgets and mobile trading functionality is seen as a ‘nice to have’ that would require a significant investment of time and money to build from scratch, even though there are several off-the-shelf vendor solutions available.” Compliance rules are often a deterrent, with many large institutions prohibiting FX trading via mobile devices. Raymond Russell, chief technical officer and co-founder of Corvil, says that the risks arising from using a mobile app (such as security, speed and reliability of execution and price certainty) inhibit their systemic use, especially for more complex order types such as VWAP (volume-weighted average price) or TWAP (time-weighted average price).
|Raymond Russell, Corvil|
Russell adds: “While some institutional FX platforms offer mobile instant messaging [and] chat tools that can be used for trading, these are primarily used as an alternative to voice for person-to-person communication rather than as an automatic trading interface.” Unencumbered by corporate strictures, retail traders are migrating to mobile. According to CMC Markets, 76% of its clients used one or more of its mobile apps to trade in January 2017 and these apps accounted for 50% of all retail turnover, compared with 40% for the same period in 2015.
FX Junction has also seen an increase in the proportion of its clients trading FX via mobile devices: from 14% in the final quarter of 2014 to 18% in the same period of 2015 and 24% in the last three months of 2016.
Yet neither institutional nor retail traders are using all the features available on mobile trading platforms – the former because they are mainly monitoring the market, the latter because of the physical limitations of the device. “For example, I have never seen anyone perform Fibonacci analysis on a mobile screen,” says BMFN CEO Luis Sanchez, referring to numbers or ratios that occur in financial markets that are mathematically significant.
|Luis Sanchez, BMFN|
Security concerns have undoubtedly deterred some traders, although Caplin’s Myles observes that trading with a bank remotely through a phone app is fundamentally no different from a security perspective to trading remotely on a laptop. “If anything, bank security and compliance concerns have forced mobile trading solutions to be even more secure than their desktop browser-based counterparts,” Myles suggests. “The effective implementation of mobile management systems now forces mobile users in most firms to use secure passcodes to access their phones, and secure login to an app using two-factor authentication provides additional assurance.”
In addition to security, other key features of a mobile FX trading solution include usability – clients who prioritize advanced features and extremely competitive pricing are more likely to be drawn to multi-dealer channels or complex desktop offerings. Native notifications are also key, helping clients stay on top of their positions and reducing the need for bank sales teams to call clients to let them know their orders have filled.
Francois Nembrini, co-founder of TopTradr, states that those initiating trades from mobiles are probably not overly concerned about speed. “Price is always important, but ease of use is a big aspect for mobile users. It is much easier to get a ‘fat finger’ issue on a tiny screen.”
|Francois Nembrini, TopTradr|
The ability to monitor open positions in real time with quick and easy access to close out or open new positions is also in demand. FX traders expect advanced features such as a comprehensive mobile charting package, breaking news and real time alerting of price movements and key economic events. An app that can push these features to clients even while they are logged out of their account will have an edge over those that do not, says Ryan O’Doherty, head of product development at CMC Markets. “Experienced traders are more likely to pay slightly more for an app that is reliable and has speed of execution at its core, but also offers a range of specialized trading tools to help manage risk and identify new trading opportunities.”