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FX: Tech focus shifts to horde of untapped trade data

The sell side has largely realized the potential of technology to minimize the impact of FX market fragmentation, although experts suggest it could do more to extract value from the data generated by electronic trading.

There are many reasons why markets become fragmented

For example, regional banks have seen an opportunity to differentiate themselves from larger competitors by specializing by region or even by currency. Institutions that can develop deep knowledge in particular areas can compete against global banks by delivering high-quality execution.

Jerry Norton-160x186
Jerry Norton, CGI

Technology has helped by enabling sell-side firms to make their processes and businesses more automated, allowing them to lower their fixed cost and remove variable elements, explains Jerry Norton, head of strategy for CGI’s UK financial services business. Pragma Securities’ chief business officer Curtis Pfeiffer adds: “Sell-side firms have adapted to the highly electronic nature of spot FX by leveraging aggregation software to combine multiple bids and offers simultaneously from multiple venues and using execution algorithms, which can take advantage of the better bid-offer spread that aggregation offers.” 

Constantly changing venue connectivity requirements introduce unwanted and unnecessary system latency, observes David Faulkner, managing director Fluent Trade Technologies. Given the large number of venues, maximizing market access through connectivity and ensuring optimal system performance requires expertise.