Last week the Barracuda FX Sales Team went to P&L Forex Network Conference, held in London. As usual it was very well attended, with lots of interesting topics on AI, Best Execution and Data.
The key themes were –
Machine learning and AI was mentioned in every panel
As machines become smarter and more machine-driven models are used to execute in the market, the question remains do we understand the risk associated with such methods? Deep learning techniques are opaque – can market participants really prove Best Execution?
Data, Data and more Data
Data, and its management, is now the main driver of innovation. Using data, clients have become more sophisticated and analytical, which has been driven by increased transparency and competition in the market. The realisation of the value of data has been the biggest change over the past few years.
- Data Governance
What is the cost to the company? How is the data sourced?
- Data Provenance
Quality of the data which you input into your models.
With this realisation, there is now a wealth of data available however it still remains a relatively small part of the market. The simplification of data is key!
Banks however do not disclose their dark data, and won’t do so, as this remains a major benefit of having a large franchise. This has lead to an increased separation among market players, with larger market makers getting data from their franchises and MBPs, versus the smaller market makers who would not have access to the same avenues.
Data is now arguably more important than trading. In the future, MBPs or exchanges may charge for data and make trading free.
Is the mandated BestEx just a box ticking exercise or is there real value being added? If the information cannot be used for alpha, or for analysing liquidity providers, or for understanding better how best to execute certain currency pairs, then are you just “box ticking”? The market has moved away from BestEx meaning best spread or top of book, instead BestEx is more relevant to fill ratios, speed, the market impact and what happens in the minutes after the trade is executed.
Surprisingly Brexit wasn’t discussed as much as one would expect. Of more concern is the potential “Corbyn impact” which hasn’t been priced in to the market.