The automation of the foreign exchange trading markets is continuing apace and focus is now starting to shift towards how it affects trading decision-making.
Panelists at this year’s TradeTech FX Europe conference said that while automation is now widespread in the industry for the benefits of cost reduction and increased efficiency, it is also becoming a more viable tool for optimising execution.
“There are various ways that we can think about automation; there is rule-based execution or straight-through processing, building that low-touch execution desk,” said David Shack, VP, FX technology at Fidelity Investments.
“Another aspect that thinking about how we can take a more complicated approach to deciding how and when to trade, looking for better trading outcomes by being able to take a more complicated process and run that more consistently across the desk, whether it is by picking the right time to trade or the right strategy to trade.”
This sentiment was echoed by Jil Sigelbaum, head of FXall at Refinitiv, who said that while the majority of automation is focused on the pre- and post-trade side, citing workflow management and order structuring to achieve best execution, it is “at-trade that is evolving most these days.”
“That’s where the majority of validation is coming into play, because we have more real-time data to use to come up with intelligent ways to trade,” she said.
Sigelbaum also raised the issue of the role of the human on the trading desk where automation taking hold, saying that there needs to be a level of trust from traders towards the automated systems they are using, particularly for execution, and that will take time to develop.
“Over time there will be less traders and machines will take over some of those tasks, but it won’t be complete, there will always be exceptions. We see it happening at the banks first; they have already been moving a lot of their trading to machines and I think that in five or ten years from now we will see that in every aspect,” she commented.
There was a common consensus among the panel that the role of the FX trader will have to evolve in the future alongside increasing levels of automation, with Ruben Costa-Santos, head of multi-asset class analytics at Virtu Financial, saying that traders will be given opportunities to spend more time with data and analytics to optimise their trading strategies as a result, while global head of foreign exchange electronic trading at Bloomberg, said that automation presented opportunities for improving scalability and optimisation of all trading processes, including the human element.