Continued advances in technology are facilitating a quantum shift in what providers today can offer FX market participants. In recent years, the transformation of trading venues has collided with the convenience and computing power released by the cloud. The result is that large-scale data analytics – once the preserve of the world’s largest global banks and institutions – are today becoming available to all.
For the first time, both parties to an FX trade can see a set of data that has been calculated in the same way by a trusted neutral party, offering the means to transform relationships between consumers and providers of liquidity. Meanwhile, analysis and visualization extracted from raw quote and trade data is facilitating a new level of intelligence that is reshaping participants’ insight into their businesses.
The new solutions have eclipsed standard analytics functions which previously were only attainable via niche technology stacks and proprietary analytics kit. Brokers can now use advanced data tools without the overhead and distraction of developing proprietary software. This is important because it unlocks a new frontier for growth via business intelligence. A process that starts with collecting data and generating reports culminates with organization-wide learning informing business growth. Getting the most out of data means using it to adapt to changing business conditions, and extracting from it a competitive advantage that can shape business-wide strategy. So what has allowed technology providers like oneZero to transform users’ data capabilities?
The democratization of data
The importance of data analytics is nothing new. But in the past, crunching large-scale time-series datasets – full order books alongside time series quote data, not just trade-by-trade data – was so expensive it was the preserve of the largest institutional players. Smaller brokers searching for off-the-shelf data solutions were left far behind.
Then came the cloud. As Amazon, Microsoft and Google replaced the modest basement racks of company IT departments with acres of air-cooled server farms, plummeting costs made sophisticated data processing capabilities accessible to everyone. As the cloud democratized data collection and storage, technology providers like oneZero began to offer analytics tools with a new level of power.
Lake of gold
Our story provides some insight into the recent progress. A couple of years ago my partner Jesse Johnson and I realized our technology had generated a massive data set that was a potential goldmine for our clients. More importantly, we realized a paradigm shift in the availability of off-the shelf kit required to harness such a vast data set.
Our flagship Hub product - which offers advanced aggregation, customized pricing, price distribution and risk management - facilitates tens of millions of trades and billions of quote messages every day from across our vast EcoSystem of participants. We invested early on in the mechanisms necessary to store, organize and transport these elements from our data centers to the public cloud. By institutional standards, the volume of activity through our Hub is hard to rival, and the public cloud was an essential component to wrangling this challenge.
Unlike others in the industry, early on we had employed the public cloud to supplement our co-located enterprise data centers that had supported our business from day one. The public cloud was the obvious place to make available the huge volume of quote and transaction related data thrown off by the Hub, alongside the analytical tools that customers needed to make sense of it.
We captured every crumb of client data thrown off by their activity on our platform (and we did so without the common latency headaches that would have hobbled their trading performance had they tried to do it themselves). We underwrote the journey for them, so that – a year from now, say – when they came in search of historical data, we would have it ready for them.
By creating this extraordinarily deep data lake, we negotiated a perennial problem faced by firms ambitious to analyze their data. Before any type of analytics can happen, you need to collect the data all in one place, normalize it and make it accessible. This typically takes internal quant teams years. But here we were offering it all, now, ready to go. The potential soon became clear.
Data, disagreement and neutrality
For as long as FX has existed the interpretation of data has fueled disagreements between participants about what it illustrates. Data defines the relationships between FX participants because it shapes one participant’s view of what their flow is worth to another. From a broker’s point of view, the flow going to a liquidity provider looks hugely profitable. The liquidity provider, with a different set of numbers, forms a completely different view of what that flow is worth.
With the parties looking at different metrics it’s not surprising they can disagree. Their views are at odds because the data that underpins them is at odds. Match their data, their perspectives will align and the disagreement disappears. They may still disagree with the assessment of course, but it won’t be because the data both are looking at doesn’t match.
oneZero is one of few participants in a position to deliver a genuinely neutral data platform. If you’re going to offer a definitive set of data on which both liquidity provider and client can agree – a neutral set of mechanisms facilitating the conversation, if you will – you have to be a neutral party who is not involved in the P&L of the trade.
For the first time, liquidity providers have access to statistics that have been calculated in a consistent way as the analytics for brokers, enabling them to have an effective dialogue with their clients. oneZero’s toolkit is transforming bilateral relationships between consumers and providers of liquidity, touching every participant in the foreign exchange value chain.
Head in the cloud
To us, the cloud was always the obvious place to collect the data thrown up by our Hub. Thanks to its ease of access and the bottomless computing power offered by the major cloud providers it is the environment where quant teams – be they brokers, liquidity providers or our own analysts – want to work.
And with our Hub clients spanning retail brokers, wholesale brokers, banks and liquidity providers – every organization with a different set of needs – we were used to serving a range of needs when it came to collecting and crunching data.
So when we started thinking about how to unlock the business intelligence available to brokers from this cloud-based data lake, we came at it with an open mind.
What if anyone with a permit could go fishing in the lake? Hosted on a public cloud, and controlled via discernible access privileges, we had the chance to unlock the potential for clients on three fronts. Firstly, they could get direct access to the data themselves; secondly, we could put our analysts to work to unlock the insights it contained, and thirdly, we could unlock the data through a secure permissioned access program, to third party providers.
Leapfrogging the data funnel
To see the value this unlocks, place it in the organization’s wider data journey. As firms better understand the gains they can harvest from well-managed data, treated as a valuable business asset, various schema have developed to capture the processes involved. The data maturity funnel is one way of representing the common stages a business goes through when growing their data function.
Typically firms start at the most basic level at the top – ensuring a digital record of business transactions and events – and work their way to the bottom – where they are using data insights to guide the organization, making data driven decisions, and unlocking innovation that translates into competitive differentiation.
Data Source effectively delivers the first three stages of this maturity cycle out of the box. With the data already collected and enriched, clients have an effective plug and play environment that catapults their data teams into descriptive and retrospective analysis of business outcomes that can be quantified and placed historically in time. In many cases this saves clients years of infrastructure build and engineering, taking them straight to a place where valuable insights can be extracted immediately.
Getting the most out of a technology solution isn’t just about organising automatic collection of data and taking the legwork out of generating reports. Your data contains the explanations of how things happened in the past and how they are likely to pan out in the future, identifying the points around which you can shape change, pursuing favorable outcomes and reducing the likelihood of unfavorable ones. The predictive potential contained in a company’s data should inform business strategies and tactics. By delivering timely, integrated Business Intelligence it facilitates a holistic approach that should ultimately drive companies to innovate in the direction that will provide the maximum competitive advantage.
Data Source provides the springboard for this journey, by offering a set of tools and a wider EcoSystem through which to extract the insights from our clients’ data. Our experience solving every problem for every client is distilled into the tools it contains, unlocking a vast network effect. The tools are in a constant state of iteration, as we develop new metrics and analyses that are easy to visualize and consume. They have been fashioned from the constant conversations between our Relationship Managers and clients about their real world problems. Segment Leaders and Product Designers think holistically about how to craft solutions in the form of products which can be made available at low cost to the entire oneZero client base.
Data Source - our next-generation, cloud-based business intelligence toolkit – helps clients get smarter about every facet of their business. It contains two elements:
Data Source DNA - lets clients access their trade and quote data in real-time, near real-time, and historically. We collect and curate their data from multiple data centers and transport it to the cloud via a high-speed connection, in formats easy for them or their third-party vendors to analyze. Data Source DNA includes a Regulatory Package that consists of RTS reports and a compliance data set to share with post-trade regulatory vendors.
Derived from Data Source DNA, Data Source Insights - include oneZero Metrics and Opportunity Analytics. The interactive, visual Opportunity Analytics shows brokers the key features of client flow and associated hedges, and the relationships they hold with their liquidity providers. Liquidity Providers see statistics that mirror brokers’ analytics, facilitating their dialogue and smoothing the relationships between consumers and providers of liquidity.
We realize that lots of the innovation in data analytics will come from third-party providers. Through our permissioned accessor program, clients can enable third parties to access their data. Whether through our insight reporting or through sharing the same data set with a client’s own analytics team or a third-party analytics provider, the potential of the raw quote and trade data is unlocked.
A crucial part of this element is the collected pool of specialist vendors that we qualify, assess and curate. Once they are approved by our clients via the permissioned accessor program, these partner vendors may access the client’s underlying neutral data from Data Source seamlessly. Crucially, this means no additional effort by clients, who therefore benefit further from a reduced time to market as regulatory reporting becomes more accessible.
We have been successful in signing up many of the leading vendors in their sectors, most recently in the case of third party regulatory reporting vendors, where the growing pool includes Cappitech, EMIREP, Point Nine and SteelEye. We are working to add more to the list, filling a pressing need for clients to meet the many and various global regulatory reporting requirements, including MiFID II, EMIR, MAR and Dodd-Frank.
Now, clients can run an RFP for new vendors, supplying them with the real data that relates to their business, and then comparing the reports that each vendor generates. For the first time, clients can place side by side the three options – their internal post-trade reporting solutions; the solutions provided by oneZero and those offered by third party regulatory vendors – and select the solutions that are right for them.
An open architecture for the future
For the first time ever, the tools to achieve this level of precision are available to participants in the FX market from retail brokers, wholesale brokers, banks and liquidity providers. The potential of this analysis of raw data is huge. Armed with this new level of granularity, data-driven decisions will transform profitability, minimize risk and secure real competitive advantage. I’ve no doubt that soon it will become essential for all brokers to use cloud-based business intelligence to grow their business. The data revolution surging through FX market is no less transformational for being quiet. Those participants who take up the challenge early have a shot at huge gains.