Kireeti Reddy
Kireeti Reddy

Exchange Simulation Environments: assisting currency traders to validate their systems' performance

FX trading has traditionally been conducted over interbank and inter dealer networks. But in recent years, with the emergence of exchange based electronic trading technologies and the benefits of the centralized clearing and risk management, traditional derivatives exchanges (ex: CME, ISE, ICE Futures, USFE, and NASDAQ OMX PHLX) are becoming significant market places for exchange based FX derivatives.

The foreign exchange (FX) markets have grown rapidly in recent years. One of the primary reasons for this rapid growth in trading volumes at most of the dominant exchanges, is the rapid adoption of electronic trading by the exchanges as well as the market participants. Exchanges are providing open standards based interfaces (ex: FIX protocol based connectivity) to their markets, which allowed technology vendors specializing in exchange connectivity, to provide high speed electronic trading software. The combination of electronic exchanges and the availability of high speed trading software led to the emergence of an important class of market participants that employ algorithmic trading at the core of their trading operations. These participants include Hedge Funds, Proprietary Trading Firms and Trading desks at all the major financial institutions. These trading groups have become the most active liquidity sources at all the exchanges, as algorithmic trading typically involves high frequency and high speed...continued

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