FEATURE
applications and then we tell them how to optimise these applications.”
Joanne Kinsella
“Most firms have more than enough data internally but it is held in too many silos for it to be used meaningfully”
to resolve issues and optimise pricing and systems in real-time to enhance profitability.”
New players
While software specialists in the FX trading space are set to gain as much as forward-thinking FX trading firms from the demand for analytics, there are analytics providers with a more general market focus that believe they have something to offer the FX market. Sumerian is a UK-based company that provides an IT analytics service that uses a firm’s own data rather than requiring additional hardware or software. “Most firms have more than enough data internally but it is held in too many silos for it to be used meaningfully”, says Joanne Kinsella, managing director, Americas at the company.
One of Sumerian’s clients is Bank of America Merrill Lynch. “Te firm was seeing significant growth in its FX trading volumes and the head of rates and currencies wanted to test its trading infrastructure. It can be very difficult when the business heads are pushing more flow to actually assess latency. We model the flow in seven or eight top FX trading
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Te advantage of Sumerian’s analytics approach is that it is very low touch, says Kinsella. It operates on a subscription service basis – the company doesn’t deploy any software – and provides recurring analytics. After an initial baseline analysis of the firm’s trading environment, Sumerian aims to tell the client how to increase trading capacity and lower latency without having to make investments in new technology or overhaul their infrastructure. “Te client wants to know which part of their trading infrastructure is going to fall over first if their trading volumes exceed their current limits or whether they can meet all their reporting and compliance requirements with their current IT architecture. At Bank of America Merrill Lynch there was a latency issue with one of the FIX engines and we were able to redirect resources from the development team to address the issue. Tere were also certain currency pairs that were more affected by latency than others.”
Aggregated analytics
It is clear that analytics is an incredibly broad term that covers a whole host of issues – not just execution performance, transaction cost and risk management but also network health and trading performance of any kind. And as the industry-wide demand for more transparency continues to rise, so will the demand for and application of ever more sophisticated analytics.
However, FX trading firms will not want to employ a range of separately sold systems and services all with their own operating standards in order to satisfy their analytical appetite. Te future, therefore, will likely lie in the partnerships that various providers can forge. As has been noted, traders are increasingly employing visualisation technology to help interpret their analytical data and strategic alliances between data providers and the vendors of visualisation technology will be crucial.
Some partnerships will be more fundamental than that, such as those made between the tier one brokers and the various data providers to ensure that the next wave of broker-based trading platforms have all the necessary analytical toolsets already built in. Just as aggregation of liquidity has proved to be crucial to firms’ trading systems, so will a similarly aggregated approach to analytics prove to be in the near future.
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