In the final hours before the results from the U.S. election are announced, we are looking at how the fastest growing Electronic Communications Network (ECN) for trading foreign exchange is preparing for the prospective market volatility.
In order to find out more about what are the tools that an ECN has to tackle outsized quotes Finance Magnates spoke to the CEO of Fastmatch, Dmitri Galinov.
When asked what are the mechanisms which the ECN uses to protect clients from volatility, Mr Galinov explained, “Fastmatch is preparing for the U.S. election and we have increased our protective trading bands to adapt to a more volatile environment that we expect to come. Our system calculates in real-time a mid point based on the best bid and the best offer on our ECN and we add bands around the mid point so that no transactions can occur outside of those bands.”
“Given that we expect that the environment is going to be very volatile we are expanding those bands. The measures worked pretty well around Brexit and we feel that the US election is worthy of the same measures. The new values of the protective bands are 4 times wider than during normal market conditions,” the CEO of Fastmatch elaborated.
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In the aftermath of the Swiss National Bank induced crisis that has hit market, insiders from the foreign exchange trading intermediary industry have become much more cautious.
Mr Galinov shared, “Without any doubt, the market started adjusting for big risk events and the industry is much better prepared for those outsized risks.”
The protective bands that Fastmatch widens around periods of big volatility have not only helped clients of Fastmatch weather the Brexit storm but also the British pound flash crash.
“Unlike some other ECNs that traded at some questionable prices, we had no issues and our trading was very smooth. The trading bands are designed to prevent outsized quotes when the markets move very suddenly. The mechanism worked beautifully around the British pound crash and during Brexit. We hope it will once again prove effective during the aftermath of the U.S. election,” Mr Galinov concluded.
The protective bands have been added to the midpoint on every currency pair. During normal market conditions, clients of Fastmatch can’t execute orders that are more than 69 pips away from the midpoint. Even if there is a quote at such a level, the order won’t be executed.