The intense competition for FX trading venues may come down to the quality and use of data as a key differentiator, according to speakers at this year’s TradeTech FX USA conference.
The FX market has witnessed a significant proliferation of trading venues coming to market over the course of the last several years, with expectations of major consolidation soon to come, however the use of data will be instrumental going forward to build and optimise a diverse liquidity network.
“Empirically there are a growing number of venues and every year it has grown. The reason for this is that the light regulation in FX means it’s a low barrier to entry and that we cannot predict what new ideas people will have,” said James Sinclair, executive director, MarketFactory.
Within such a crowded marketplace with low barriers to entry, competition among venues is fierce and innovation is required to stand apart to attract buy-side clients.
“One thing that should be very clear is the innovation that is happening in data science right now is not that you are going to get a new type of PDF or graph from your vendor or liquidity provider that is going to make you smarter,” commented Andrew Ralich, CEO of technology provider, OneZero.
“The venues stepping up to provide data in the same ways that liquidity providers have been using it before is going to be one of the differentiating factors, as well as one of the interesting consolidation factors. It’s a challenge but the technology is out there now to do it.”
Jill Sigelbaum, head of FXall, Refinitiv’s trading venue for FX, also highlighted the important role of data provision and usage for the future of the FX markets, particularly for different venue operators.
“It’s a huge advantage to be a large venue operator because you have access to all that rich data. This gives us a super amount of intelligence on how the market is trading, when is a good time to trade, and we’re building tools to give that information back to our clients so that they have better intelligence with how they trading,” Sigelbaum said.
“The next step will be to automatically generate decision support suggestions in real-time. The third step, probably a few years from now, will be to automatically trade based on parameters that are set based on what clients need to achieve.”