FX: Financial extranets become all-important in a world of fragmented liquidity
Fragmented liquidity has helped make financial extranets fundamentally important tools for global FX market players, but traders need to do their due diligence in picking the right fit for their strategies.
Financial extranets have become a fundamental component of the business done by buy-side and sell-side FX trading firms, although traders need to consider that not all offerings are the same.
A financial extranet provides access to a service or liquidity pool no matter where it is hosted.
In cases where the network provider has a point of presence in a datacentre and provides connectivity between multiple datacentres, trading firms can take advantage of that infrastructure to have one integrated and centrally managed connectivity solution combining local cross connects and low-latency, inter-datacentre connectivity.
This is particularly appealing to firms trading in more than one location at the same time.
Allowing firms to directly access multiple services over a single infrastructure optimizes processes and reduces costs, observes Yousaf Hafeez, BT’s head of business development for financial technology services.
“Crucially, extranets allow firms to automate the FX trading cycle by providing access to pre-trade, trade and post-trade applications,” he says.
Trading firms need support to maintain operations in a key datacentre, whether that is in managing their cross connects in a single centre or hosting servers in multiple centres and providing market access.