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Foreign exchange rats


No, this headline does not refer to those naughty traders who abused the London fix in the foreign exchange market and caused a number of banks to receive huge fines.

The conversation is already moving on to what happens next in the FX markets and how such abuses can be avoided in the future.

Might rats be the answer?

A few years ago the conceptual artist Michael Marcovici trained dozens of rats to detect patterns in the FX futures markets.

As The Atlantic reports: “To do this, he converted price fluctuations into a series of notes played on a piano – if a price went up, the next note was higher – and then left it up to the rat to predict the tone of the note that followed. With some prodding, the rats began forecasting price changes, and Marcovici says that they were outperforming human traders after a few months of training.”

Given how London’s FX trading community has been hit by a series of suspensions and terminations in the wake of the fix scandal, might highly trained rats be the future, rather than electronic trading? We doubt it, especially if those sneaky rats somehow learned to game the system. And it would give a whole new meaning to clawbacks, wouldn’t it?

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