Talking Thalesians: Ancient Wisdom and Speculation in FX

One of the first things people want to know when they meet Saeed Amen, Co-Founder and Consulting Quant for The Thalesians, is: what does Thalesians mean?

The puzzling name refers to the Greek philosopher, Thales of Miletus, the first options trader.

Mythology has it that after becoming fed up with being ridiculed for being an impractical philosopher, an occupation suited only for poverty, Thales made a fortune by forecasting a good olive harvest and cornering the press market.

It’s these kind of stories that led Amen to make yesterday’s wisdom a cornerstone of his first book: “Trading Thalesians: What the Ancient World Can Teach Us About Trading Today”.

“I’ve been working in markets for 10 years, and it was a natural extension to write about I’d seen, but at the same time, I wanted to have a spin on it,” said Amen. “I didn’t know too much about the ancient world before I started the book, so it was a good opportunity to find out what’s happened in history.”

Amen’s decade in the financial industry includes working in major investment banks like Nomura and Morgan Stanley, but his most memorable experience may have been watching Lehman Brothers implode from the inside as a young quant strategist.

Risk has been transferred from sell side to buy side in 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

That catastrophe served as a catalyst to start the Thalesians, along with his colleagues Paul Bilokon, currently a director at Deutsche Bank, and Matthew Dixon, currently an academic in Chicago.

“We were trying to work out what went wrong, so we started The Thalesians seminars, and it built up into a big community,” said Amen. The Meetup group has just over 1,800 members with branches in London, New York, San Francisco and Budapest.

It’s also grown into a research and consultancy with an office in Level39, a fintech hub in London’s financial district, Canary Wharf, and Amen is a regular commentator on the markets for major media outlets.

And just as looking back at ancient wisdom can teach us about how we got here, and where we might be going, so too can speculating about the future. The next big thing in Institutional FX, said Amen, is going to be in the execution space.

“It’s not going to be the case that you are just going to a broker and get a price for your $1 billion order because banks will charge you, they can’t take as much risk as they used to,” said Amen.

A few years ago, most orders were manual but things are changing: ticket sizes are going lower, more and more is being transacted on electronic platforms, and it costs more for the buy side to get prices in big sizes. In other words, execution risk is going up.

When buy side uses trading algorithms, there’s no way of knowing what the price will be at the end of the fill. It’s a whole new way of thinking from going to a broker and getting a price up front, Amen noted.

It also means buy side will need to manage and optimize execution risk: “That part’s (about) going to the right venue, what type of execution algorithms you are using, and whether your bank’s giving you the best Liquidity Liquidity The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent Read this Term.”

“Risk has been transferred from sell side to buy side in execution,” said Amen. “There’s also a lot more scrutiny of this as well in terms of best execution, there’s regulatory pressure to make sure buy side get the best price.”

I wonder what Thales would bet on knowing that?

Read a chapter from Saeed Amen’s book