The FX Live Scribe

We recently ran our FX in-person meeting for our London based buy side community, looking into workflow & execution technology and desk structure & management efficiency. Some of the key discussion points, takeaways and photos from the sessions are captured below in the form of a scribe…

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</p> <ul> <li style='font-weight: 400;' aria-level='1'><span style='font-weight: 400;'>Smart automation, rules based to begin with, building trust internally in automated systems is the way forward</span></li> <li style='font-weight: 400;' aria-level='1'><span style='font-weight: 400;'>Standardisation of small tickets, start with the easy, smaller cap trades before moving onto bigger tickets</span></li> <li style='font-weight: 400;' aria-level='1'><span style='font-weight: 400;'>Good to focus resources on a couple trades but not to overall micromanage all technology</span></li> <li style='font-weight: 400;' aria-level='1'><span style='font-weight: 400;'>Improved automation. There is a massive appetite from buyside to standardise the flow</span></li> <li style='font-weight: 400;' aria-level='1'><span style='font-weight: 400;'>Automation needs to be flexible and at the core of it should be data to drive execution</span></li> <li style='font-weight: 400;' aria-level='1'><span style='font-weight: 400;'>Automation implementation is key for the future of the FX desk</span></li> <li style='font-weight: 400;' aria-level='1'><span style='font-weight: 400;'>Improve automation in FX</span></li> <li style='font-weight: 400;' aria-level='1'><span style='font-weight: 400;'>Bring buy side and bank liquidity together</span></li> <li style='font-weight: 400;' aria-level='1'><span style='font-weight: 400;'>Explore rates based automated trading further</span></li> <li style='font-weight: 400;' aria-level='1'><span style='font-weight: 400;'>Sophisticated automation and distributed ledger</span></li> </ul> <p>
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<b>Where are you at on the NDF electronification journey so far?</b></p> <p><span style='font-weight: 400;'>At a tier one asset manager, they launched some funds many years ago called ‘double-decker’ funds. They were essentially emerging market funds for Japanese clients. They found rolling Brazil trades particularly problematic and felt they had to find better ways to execute them. At this time, they were trading a yard a day. However, a lot of the custodians had similar mandates and were engaged in the market at the same time. They then looked at when the best time to execute was in order to avoid noise in the market. It was important for them to roll their positions before the custodians did. They decided to execute via voice and NDFs. They now trade all other currency pairs; from Asian NDFs to Latam. They primarily trade illiquid NDFs (Korea, Brazil) via voice, and for the rest they stream them electronically. </span><span style='font-weight: 400;'><br /> </span><span style='font-weight: 400;'><br /> </span><span style='font-weight: 400;'>When you are trying to trade with Egypt for example, it is difficult from a user perspective as the FX risk at the moment is fairly low. They predict that ‘FX will be back’ and Asia will be a big part of the focus for next year. </span><span style='font-weight: 400;'><br /> </span><span style='font-weight: 400;'><br /> </span><span style='font-weight: 400;'>There are some algos out there that help you trade NDFs. The beauty of trading NDFs is you can trade on whatever date you like. However, if you go down the broken dates route, you don’t necessarily get the best outcome; you might have a good price, but not the best price. </span>
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</p> <ul> <li style='font-weight: 400;' aria-level='1'><span style='font-weight: 400;'>Smart automation, rules based to begin with, building trust internally in automated systems is the way forward</span></li> <li style='font-weight: 400;' aria-level='1'><span style='font-weight: 400;'>Standardisation of small tickets, start with the easy, smaller cap trades before moving onto bigger tickets</span></li> <li style='font-weight: 400;' aria-level='1'><span style='font-weight: 400;'>Good to focus resources on a couple trades but not to overall micromanage all technology</span></li> <li style='font-weight: 400;' aria-level='1'><span style='font-weight: 400;'>Improved automation. There is a massive appetite from buyside to standardise the flow</span></li> <li style='font-weight: 400;' aria-level='1'><span style='font-weight: 400;'>Automation needs to be flexible and at the core of it should be data to drive execution</span></li> <li style='font-weight: 400;' aria-level='1'><span style='font-weight: 400;'>Automation implementation is key for the future of the FX desk</span></li> <li style='font-weight: 400;' aria-level='1'><span style='font-weight: 400;'>Improve automation in FX</span></li> <li style='font-weight: 400;' aria-level='1'><span style='font-weight: 400;'>Bring buy side and bank liquidity together</span></li> <li style='font-weight: 400;' aria-level='1'><span style='font-weight: 400;'>Explore rates based automated trading further</span></li> <li style='font-weight: 400;' aria-level='1'><span style='font-weight: 400;'>Sophisticated automation and distributed ledger</span></li> </ul> <p>
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<b>Where are you at on the NDF electronification journey so far?</b></p> <p><span style='font-weight: 400;'>At a tier one asset manager, they launched some funds many years ago called ‘double-decker’ funds. They were essentially emerging market funds for Japanese clients. They found rolling Brazil trades particularly problematic and felt they had to find better ways to execute them. At this time, they were trading a yard a day. However, a lot of the custodians had similar mandates and were engaged in the market at the same time. They then looked at when the best time to execute was in order to avoid noise in the market. It was important for them to roll their positions before the custodians did. They decided to execute via voice and NDFs. They now trade all other currency pairs; from Asian NDFs to Latam. They primarily trade illiquid NDFs (Korea, Brazil) via voice, and for the rest they stream them electronically. </span><span style='font-weight: 400;'><br /> </span><span style='font-weight: 400;'><br /> </span><span style='font-weight: 400;'>When you are trying to trade with Egypt for example, it is difficult from a user perspective as the FX risk at the moment is fairly low. They predict that ‘FX will be back’ and Asia will be a big part of the focus for next year. </span><span style='font-weight: 400;'><br /> </span><span style='font-weight: 400;'><br /> </span><span style='font-weight: 400;'>There are some algos out there that help you trade NDFs. The beauty of trading NDFs is you can trade on whatever date you like. However, if you go down the broken dates route, you don’t necessarily get the best outcome; you might have a good price, but not the best price. </span>
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