FOREX TECHNOLOGY
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electronic FX options platform based on cloud computing, says there has never been a greater need for the accurate measurement of risk in FX markets. “In the past, risk management involved running the portfolio in the night at the end of a day’s trading calculating all the different types of risk in one batch, which would take hours. Trading would be done the next day, with all risk management based on the close rate of yesterday,” he says. “Te problem is, if the market moves significantly, all the numbers that you are looking at are not accurate. In order to avoid this, using complex structures, you have to switch to real-time risk management. Tis, together with the increase in demand for applications to be delivered in SaaS (Software as a Service) model, requires to use cloud computing. Te cloud provides dynamic computing allocation based on demands, various time zones, and customer profiles. It is also a platform that enables dynamics failover and scalability in all layers of application.”
Levy points out that the massive computational power of cloud-based offerings enables FX trading firms to calculate the value of 1,000 FX options in about one minute. He says any buy or sell side firm seeking to conduct such a calculation in-house would have to invest in dozens of server racks to complete such heavy-duty, real-time calculations. “We enable the calculation of performance ten years back, or daily performance. Or a structure within ten seconds. You must have the cloud to perform such calculations otherwise it will take you a long time,” he says.
Levy expects fund administrators to switch to cloud- based solutions, given its capacity to rapidly speed up the delivery “of the numbers” to hedge funds, which can then assimilate the data into their risk management systems. He expects wide uptake in the future of cloud services for real-time risk analysis and back-office calculations. “Vendors. Tose managing large portfolios for clients. Tey will all have to switch to the cloud,” says Levy.
108 | april 2012 e-FOREX
Tolman of Cloud Trading Technologies says once risk applications are migrated to the cloud, it better facilitates a more holistic view of risk across different asset classes. “In the past, banks have not been able to put the different types of risk they face into a homogenized context. Being able to analyze information from multi-sources in real time should mean that decision making becomes better and understanding the underlying risk situations also becomes better,” he says.
A more holistic view
Tolman expects the capacity of the cloud to provide a snap-shot of risk positions across different instruments to be of increasing value to FX market participants as volumes in cross-asset class trading continue to grow. Tis trend is being driven in part by global data center networks – which have become vibrant hubs for co- location services facilitating ultra-low latency trading strategies by banks and hedge funds – providing linkages between banks, FX trading platforms and exchanges. For example, interdealer broker Icap’s Electronic Broking Services (EBS) and Credit Suisee CrossFinder are both located in Equinix’s LD4 data centre in Slough.
Furthermore, Tolman points out that an equity or credit transaction can also create an FX risk, which needs to be factored into a bank’s risk management system. “If you have underwritten a credit default swap with a major Japanese corporate. Lets say you have to pay out a certain amount of money if there is a credit event. If a credit event is imminent you have a credit risk and also a foreign exchange risk. Tere are various risks involved and if you want to have a risk system that works you have to take account of this,” says Tolman.
Big data
Neil Cresswell, Managing Director, Europe, Middle East and Africa (EMEA) at Savvis in Reading, saysthat as the level of FX market data needing to be analyzed
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