Currency Probes, Specter of Electronic Trading Threaten to Displace Human FX Traders
- With much of the global fx industry and regulators focused on a series of currency probes that have vexed the financial landscape, few have pondered the long-term ramifications on the fx market itself.
With much of the global Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term industry and an international panel of regulators focused on a series of currency probes that have collectively vexed the financial landscape, few have stopped to ponder the immediate and long-term ramifications on the forex market itself.
Will Technology Eventually Make Human Forex Traders Obsolete?
Technology has long been a double-edged sword for forex – with more advanced platforms and trading tools rekindling lingering questions of efficiency, along with the mounting cost of labor when weighed against advanced electronic trading programs. That the industry is already rife with corruption and inconsistencies only lends credence towards this dilemma, ultimately displacing and mitigating the numbers of active human forex traders.
“81% of Spot Trading Will Be Electronic By 2018” – Aite Group LCC
Irrespective of the recent fallout by several global banks – including leading stalwarts such as the Royal Bank of Scotland (RBS) having already reduced forex fixings and services in wake of the scandals – the numbers themselves are hardly encouraging. According to Aite Group LCC, an independent US-based consulting and research firm, “Electronic dealing, which accounted for 66% of all currency transactions in 2013 and 20% in 2001, will increase to 76% within five years. Moreover, roughly 81% of spot trading will be electronic by 2018.”
Exactly how firms and brokerages choose to address this trend or whether they adhere to a myopic understanding of figures such as these is anyone’s guess. It is worth noting however, that so long as a human element is retained, whether it be on a retail trading or an institutional scale, currency probes, charges of corruption or misappropriation, or fraudulence exist as a plausible scenario. Indeed, fines lobbied against banks by regulators have already reached record high levels for an industry that handles nearly $5.3 trillion in assets each day – lead by the industry’s largest in Deutsche Bank, Citibank, Barclays and UBS.
Survival of the Fittest
According to Charles Geisst, author and finance professor at Manhattan College, “Foreign exchange traders are much like stock floor traders: a rapidly dying breed. Once the banks realize they are costing them money, the positions will quickly dwindle.” Ultimately however, a byproduct of this movement towards more automated trading or electronic platforms could eventually help foster greater means of transparency and proper clearing methods – a murky subject at the present for retail forex in particular.
“Many algorithms in previous foreign exchange platforms were very, very basic – not a lot more than egg timers. The equities world, on the other hand, had advanced algorithms with gaming technology inside of them – they would randomly split up clip sizes to provide best Execution Execution Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a co Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a co Read this Term. A lot of that technology has now been brought into the foreign exchange world,” added Chris Purves, Global Head of foreign exchange, rates and credit electronic trading at UBS AG, in an interview with Bloomberg.
The future for forex traders remains uncertain, however global financial institutions and banks are clearly more than capable of erecting new paradigms for currency trading. Furthermore, brokerages and retail forex traders are certainly not immune to any such changes as well given a trickle-down effect of efficiency measures. What is certain, is that every day in which currency and libor probes drag on will certainly weigh on the forex industry as a whole in a negative light.
With much of the global Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term industry and an international panel of regulators focused on a series of currency probes that have collectively vexed the financial landscape, few have stopped to ponder the immediate and long-term ramifications on the forex market itself.
Will Technology Eventually Make Human Forex Traders Obsolete?
Technology has long been a double-edged sword for forex – with more advanced platforms and trading tools rekindling lingering questions of efficiency, along with the mounting cost of labor when weighed against advanced electronic trading programs. That the industry is already rife with corruption and inconsistencies only lends credence towards this dilemma, ultimately displacing and mitigating the numbers of active human forex traders.
“81% of Spot Trading Will Be Electronic By 2018” – Aite Group LCC
Irrespective of the recent fallout by several global banks – including leading stalwarts such as the Royal Bank of Scotland (RBS) having already reduced forex fixings and services in wake of the scandals – the numbers themselves are hardly encouraging. According to Aite Group LCC, an independent US-based consulting and research firm, “Electronic dealing, which accounted for 66% of all currency transactions in 2013 and 20% in 2001, will increase to 76% within five years. Moreover, roughly 81% of spot trading will be electronic by 2018.”
Exactly how firms and brokerages choose to address this trend or whether they adhere to a myopic understanding of figures such as these is anyone’s guess. It is worth noting however, that so long as a human element is retained, whether it be on a retail trading or an institutional scale, currency probes, charges of corruption or misappropriation, or fraudulence exist as a plausible scenario. Indeed, fines lobbied against banks by regulators have already reached record high levels for an industry that handles nearly $5.3 trillion in assets each day – lead by the industry’s largest in Deutsche Bank, Citibank, Barclays and UBS.
Survival of the Fittest
According to Charles Geisst, author and finance professor at Manhattan College, “Foreign exchange traders are much like stock floor traders: a rapidly dying breed. Once the banks realize they are costing them money, the positions will quickly dwindle.” Ultimately however, a byproduct of this movement towards more automated trading or electronic platforms could eventually help foster greater means of transparency and proper clearing methods – a murky subject at the present for retail forex in particular.
“Many algorithms in previous foreign exchange platforms were very, very basic – not a lot more than egg timers. The equities world, on the other hand, had advanced algorithms with gaming technology inside of them – they would randomly split up clip sizes to provide best Execution Execution Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a co Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a co Read this Term. A lot of that technology has now been brought into the foreign exchange world,” added Chris Purves, Global Head of foreign exchange, rates and credit electronic trading at UBS AG, in an interview with Bloomberg.
The future for forex traders remains uncertain, however global financial institutions and banks are clearly more than capable of erecting new paradigms for currency trading. Furthermore, brokerages and retail forex traders are certainly not immune to any such changes as well given a trickle-down effect of efficiency measures. What is certain, is that every day in which currency and libor probes drag on will certainly weigh on the forex industry as a whole in a negative light.