DynexCorp - from systems to market pulse: a life long performance in currencies >>>
What sort of trading platforms does DynexCorp find most appropriate and what factors influenced that choice?
We developed a fruitful relationship with Deutsche Bank, worldwide leader in FX liquidity, as early as 2002. Our preferred dealing platform is Deutsche Bank’s Autobahn FX. Not only has it become a benchmark for liquidity and pricing, it also has the most down-to-earth interface design. We consider the learning curve for most electronic retail platforms too onerous. Since the start of eFX, bid-ask spreads have collapsed, for the benefit our clients. We favour single click-and-deal transactions or through our API, not revealing our intentions. Te advantages are obvious: tighter spreads, faster fills, tighter risks. Our trading room used to be a lot louder during the 1980s.
How did you go about building your trading desk IT infrastructure and was the trading software and connectivity technology provided by third party vendors?
With regards to operational computing we always have an IT consultant at hand. Everyone in the company works with the same computer or laptop model. We have commissioned SnapDragon Systems to design custom applications for charting, APIs and robotic trading. Te problem with robotic trading is its extreme reliance on connectivity and monitoring. Once you have to look after both, the robot is not so much a robot any more, or is it? As in the kitchen, a robot is just a friendly beast that has the knack of breaking down when you most need it.
Trading technology has come a long way during the last 20 years. How much reliance does DynexCorp place on the latest automated trading toolsets and execution algorithms?
Technology can only improve our lives. An e-platform is the difference between having a car and having
to travel by foot. I do not believe we could trade the volume we do, without eFX platforms. Trading electronically has greatly reduced the chance of human errors. Online trading is linked to Straight Trough Processing. Tat’s an immediate relief for the back office, with a 70% reduction in time. eFX technology allows systematic trading to be executed more accurately via an API and also generates a data stream that is an important research material for us. We store it for future research.
As you know we also publish Currency Investor magazine and so are great champions of currencies as a tactical asset class. How difficult have you found it to persuade investors that currencies can be leveraged not just for risk mitigation by institutional asset managers but are also as an excellent means for achieving more balanced and diversified personal investment portfolios?
In the world of alternative investments, pure currency alpha should have moved much sooner into the limelight as an asset class. It compares favourably in terms of a) return, b) risk and c) correlation statistics. Te currency market is after all bigger and more liquid than any other. It has been difficult for a reason, to persuade institutional investors to diversify their portfolios by adding uncorrelated alpha returns from currencies.
Pension and endowment funds giving pure currency alpha a try may have typically made the mistake of turning to currency overlay managers they are familiar with and basing their decisions in large part on the size of the manager. Unfortunately asset size is not a good criterion for handing out mandates for pure currency alpha.
Overlay managers as well as banks have delivered disappointing currency alpha results, thus creating misleading market lore among institutions about
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