PRESS RELEASE

 

StreamBase’s Study Reveals Increased Importance of Price Discovery, Liquidity Aggregation, and Regulation in FX

Regulatory uncertainty and the complexity of the FX market drive trading technology
 
NEW YORK (USA) and LONDON (UK) — August 23, 2011 — StreamBase Systems today announced the results of its “FX Trading and Technology Trends in 2011” study. The survey results revealed that regulatory changes are having the greatest impact on FX trading from both a business and technology perspective with firms becoming more sophisticated in adopting algorithmic trading to gain control over their FX transactions.

“FX is a different playing field with a diverse group of market participants with a handful of liquid currency pairs and a variety of investment strategy goals. Banks are facing increased competition from both multi-bank platforms and high frequency traders in order for them to remain competitive,” said Sang Lee, co-founder and Managing Partner at Aite Group. “It is critical that they manage customer expectations with regard to price improvements, fill rates and cost, while managing their risk in real-time.”

Richard Tibbetts, CTO of StreamBase Systems adds: “We are seeing sell-side firms implement technology with two goals in mind: one is to improve their execution services by offering more sophisticated and customizable trading tools to their clients; the other is to improve their institutional services with better pricing and efficient hedging. For example, the fact that more firms have some level of liquidity aggregation capabilities reflects the increased importance of intelligent, real-time FX market aggregation, and the fact that over a third of those surveyed plan to improve their aggregation capabilities reflects the trend toward increased innovation and sophistication in the FX markets.”

Key findings of the StreamBase FX Trading and Technology Trends in 2011 survey include:

Regulatory Uncertainty

  • Although the participation of high frequency traders and non-reporting banks are contributing greatly to the rapid growth and diversity of the FX market, 52% of sell-side firms still believe regulatory requirements will have the biggest impact on their FX business rather than increasing threat from competitors.
  • 43% of buy-side firms expect increasing regulatory scrutiny over the global FX market; and 37% of buy-side firms expect to see an increased call for market transparency as a result of recent lawsuits regarding FX transaction costs.

Algorithmic Trading

  • 43% of survey respondents use algorithms for FX trading – about the same as last year. Of note is that 64% of those respondents develop their algorithms internally instead of using algorithms provided by banks or other vendors.
  • Buy and sell-side participants have different appetites for determining the quality of execution. Sell-side participants are primarily interested in applying intelligent pricing models, which lead to better fill rates for client requests. Improved fill rates turn out to be more important than lower implicit cost, greater speed of execution or even minimizing market impact.
  • This year, the complexity of integrating and normalizing various FX data formats has replaced low latency data sources as the main concern for effective algorithmic trading. 36% of survey respondents struggle with the integration whereas only 22% of them considered accessing low-latency sources the biggest data challenge for FX.

FX Trading Systems

  • About 94% of respondents currently have some liquidity aggregation capabilities in their FX trading systems, compared to 65% last year, and 34% of respondents plan to improve or add liquidity aggregation capabilities in their FX trading systems, compared to 26% last year.
  • 31% of respondents plan to improve or add algorithmic order execution and management capabilities in their FX trading systems.

Over 135 respondents involved in institutional FX trading participated in this study. Results from the survey were discussed in an online roundtable by a panel of FX industry experts including Laurie Berke, Principal of TABB Group; Andrew Haines, CIO of GAIN Capital; James Sinclair, Co-Founder and CEO of MarketFactory; Richard Tibbetts, Co-Founder and Chief Technology Officer of StreamBase.

To view the roundtable discussion and to read a comprehensive report of the survey findings, please click here

For more information please contact:
Emily Pan
StreamBase Systems, Inc.
Tel: +1 (917) 621-2631
Email: press-enquiries@streambase.com
Twitter: @streambase
Facebook: http://www.facebook.com/streambase
Media Pack: http://www.streambase.com/press-enquiries.htm

About StreamBase
StreamBase Systems, Inc., a leader in high-performance Complex Event Processing (CEP), provides software for rapidly building systems that analyze and act on real-time streaming data for instantaneous decision-making. The World Economic Forum awarded StreamBase the title of Technology Pioneer.

StreamBase’s Event Processing Platform™ combines a rapid application development environment, an ultra low-latency high-throughput event server, and the broadest connectivity to real-time and historical data. Leading investment banks, hedge funds, and government agencies use StreamBase to power mission-critical applications that increase revenue, lower costs, and reduce risk. Applications in Capital Markets include Algorithmic Trading, FX Aggregation and Pricing, Smart Order Routing, and Market Data Management.

StreamBase customers include CME Group, BM&FBOVESPA, SunGard, ConvergEx Group, RBC Capital Markets, CMC Markets, City Index and BlueCrest Capital Management. The company is headquartered in Lexington, Massachusetts with offices in New York, Washington D.C. and London. For more information, visit www.streambase.com.

 
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