Nicola Tavendale
Nicola Tavendale

People and Machines What the future holds for FX

The future of financial services will be a true merger of the best of both human and machine, according to a report produced by Refinitiv with Greenwich Associates. It finds that over the next three to five years investing and trading decisions will still need to leverage human intuition, while data analysis and trade execution will become increasingly automated and more efficient. Nicola Tavendale investigates.

The series on the future of trading explores how technology and the growth of data have kept markets moving, with the third and final paper revealing the impact of this evolution on the traders themselves. Michael Chin, Managing Director and Global Head of Trading Proposition at Refinitiv says that when it comes to the future of work, innovation is often met with scepticism no matter how awe-inspiring it appears. Yet this report sets out to debunk many of the fears about ‘machines taking over the world’ and instead explains how the industry can better adapt and move forward, he adds.

“Despite advances in AI and data analytics, people are still in charge. In fact, as technology becomes increasingly sophisticated, new opportunities for top-tier talent are emerging,” Chin explains. “It’s apparent that the source of this talent has been shifting for years now. While finance has been the most common educational path to the trading profession, it’s certainly not the only one.”

Opportunities for growth

In addition, the FX market has evolved somewhat differently to other asset classes in terms of automation and the electronification of instruments. Regulatory reforms ushered in following the financial crisis have led to market structure changes in FX, including the introduction of SEFs, the rise of single-dealer and third-party platforms and an increased focus on algo trading. The Covid-19 pandemic has also accelerated a global shift in regulatory and institutional openness to the increased use of technology in FX trading, which has had to be rapidly re-evaluated in order to enable more traders to work from home. One key example of this shift is the widespread reports of an upturn in electronic FX trading volumes across all the leading banks, with a notable rise of algo trading as clients seek out strategies to help them navigate market volatility. 

The Future of Trading: The People is based on a global study conducted in April 2019 by Greenwich Associates with 107 capital markets professionals, which examined technology trends, the data explosion and the skills required to be successful in capital markets in the future. The findings show that about 56 percent of financial markets professionals have finance degrees, but computer science and engineering backgrounds are increasingly prevalent - and gaining. 

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Respondents to Greenwich Associates study

“The reason is that new solutions require deep knowledge of both financial markets and technology,” adds Chin. “The ‘digital natives’ will be the ones who understand the technology and are more attuned to and willing to explore potential innovations. As a result, we’re seeing more quants, data scientists and programmers in the field, who are focused on advanced analytics, algorithms and process automation solutions rather than user experiences.”

However, Chin argues that technology is not replacing humans, but rather enhancing their work experience. Around 80 percent of the finance professionals surveyed for this report felt that technology has provided them with new career opportunities and half also said it has even accelerated their career growth. Perhaps surprisingly, it is not just younger generations who are seeing the gains, with some 60 percent of ‘Gen Xers’ saying they believe technology has reshaped their career in unexpected ways, much higher than among baby boomers, at 41 percent, and even millennials, at 48 percent.

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Benefits of automation

In fact, some 85 percent of respondents claimed to be unconcerned that technology might replace their current job. Even so, two-thirds of finance professionals expect about 25 percent of their jobs to be automated in the next three to five years. Yet according to Kevin McPartland, Head of Research, Market Structure & Technology at Greenwich Associates, this increase in automation is actually a good thing. He explains: “Automation will expand in nearly every facet of the trading process: in data analysis, trade processing and, of course, trading itself. But we should rethink our preconceived notions of what automation does to jobs and look toward the opportunities presented and away from jobs that automation might make obsolete.” 

Firstly, he believes that automation allows valuable and often expensive employees to focus on even more valuable tasks throughout the day. In addition, McPartland says that automation cannot be deployed with a “set it and forget it” mentality. “Whereas traders need trading and executive assistance, software needs developers, testers, business analysts and front-line tech support,” he adds. For instance, before Dodd-Frank electronified the swaps market in the US, trades were done over the phone between an investor and dealer. 

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According to McPartland, while this manual approach was considered easy, it also brought with it the opportunity for a lot of human error, from incorrectly entering the execution price into the system to not recording the trade altogether, leaving the firm unknowingly exposed to millions of dollars in losses. 

“Today, much of the opportunity for human error has been removed from the system, massively limiting counterparty, operational and other risks - a good thing for the market and the safety of the world’s financial system,” he says. “However, the complexity inherent in the web of technology that manages the process, from pre-trade to post-trade and beyond, presents a new set of risks that must be closely monitored and managed. Most agree that the new way is much better than the old way, but the best and brightest are crucial to keeping that train on the tracks.” 

Better ways of working

Jobs data from the US Bureau of Labor Statistics provides further quantitative proof that people are still in charge. Roughly one million finance jobs have been added in the past decade following the lows of the financial crisis, growing by nearly 12%. As McPartland has already noted, the nature of these jobs and skills required have changed. “While those that know the markets and can work with clients remain highly valuable, those with technical expertise, particularly when it comes to data science, are increasingly just as important to long-term success,” he adds. “In rebuilding their rosters over the past decade, capital markets firms have brought on those individuals who are expert in solving today’s problems, not those with past expertise.” Although there have certainly been bouts of ‘rightsizing’ across the industry in recent years, McPartland says it is important to remember that anytime a job is lost to automation, another exists somewhere to build and maintain those computer algorithms.

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Michael Chin

Having been freed from mundane tasks like manual processing, portfolio managers, analysts and brokers will also have more time to work one-on-one with clients and focus on activities that save costs, add value or increase revenues, adds Chin. In addition, he believes that technology innovation promises to make capital markets and interaction between people more efficient, particularly as the buy side will continue to look to the sell side for market colour, capital commitment, research and other value-added services.

“As trade ideas morph into idea discussions, the sell side is expected to increase the use of digital communication tools to chat, discuss trades and collaborate more broadly. In this new market environment, traders will become execution consultants, while portfolio managers will rapidly identify, evaluate and test investment ideas,” Chin says. Machines will, in turn, do the data consumption, deep analysis and execution of trades and investments, while humans will continue to work with customers, identifying nuanced opportunities in the process as well as negotiating and managing their client relationships, he adds.

Pandemic and its impact

The nature of work is undeniably changing, notes Chin. In fact, he believes the importance of trusted relationships has never been so pronounced as it has been during the COVID-19 pandemic. Markets and institutions globally, have had to grapple with new ways of working during this time of historic volatility and uncertainty. “Capital markets are still, and will continue to be, run by people, for people. It is people who will need to program the robots and talk to customers. And it will be people who build trust, engage in personal interactions and identify the next ‘big idea’,” Chin adds. “More than ever, it is the people working in the financial industry who are providing that calming voice to worried clients facing unprecedented market movements.”

Even during the Covid-19 crisis, the FX markets have also not held back, with a number of new and innovative solutions having been launched during this period. In March, for example, The Bank of China unveiled its AI currency price prediction app, which is available through the Refinitiv Eikon. The tool, known as DeepFX, covers six major currency pairs and is, according to the bank, aimed at “helping traders, quant developers, FinTech innovation heads, as well as data scientists”, while Refinitiv noted that it is a “timely and practical tool to empower users with the insights they need to navigate the turbulent FX landscape.” 

Refinitiv has also recently launched an API tool which will automate access to its FX swaps trading venue, the Refinitiv Forward Matching MTF, for clients which it says will also improve efficiency. “With the move towards electronification of FX swaps trading comes the need and the opportunities for more innovative solutions to drive efficiencies without sacrificing liquidity and effective trade execution,” says Paul Clarke, head of FX venues at Refinitiv. “This is especially true in the ongoing market where the trading workflow has changed considerably.” 

Adapt to succeed

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Kevin McPartland

Even in 1995, programming was still being treated most often as an operations function, done away from business leaders, notes McPartland. Technologists were only on the trading floor when they needed to gather requirements for a new system or when something went wrong. “In this environment, data was ingested primarily by human eyes, with candlestick charts and spreadsheets being the primary means of consumption,” he explains. “Fast-forward two decades. Nearly everyone programs on the trading floor, or at least knows how to. Programming classes begin in elementary school, so getting to Wall Street without that knowledge is nearly impossible.” 

Trading and investing decisions are still overseen by the best and the brightest, but the data consumption, deep analysis and execution of those trades and investment ideas are all done via machines, McPartland observes. “Traders now act more like commercial airline pilots, keeping an eye on the autopilot and only stepping in when something goes wrong, the route changes or the landing is more complicated than usual. But trust still matters, with firm and personal reputations continuing to play a huge role in which businesses succeed and which do not,” he argues. 

Complex markets will also still operate with a tremendous amount of one-on-one negotiating, according to McPartland. However, he believes an increasing amount of that communication will be digital, making deals happen more quickly and allowing compliance departments to ensure everything stays above board. “In five years’ time, we will not find it necessary to do research about the impacts of this technology, as the market and increasingly the world will see today’s technology as a part of life and not something new and interesting,” he adds. “Of course, there will be new innovations and ways of doing business - ideas that we haven’t thought of yet or that even seem possible in today’s world. But as it has over the past five, 20 and 50 years, the financial services industry and all those that work in it will adapt and move forward.”

Just like innovations of the past, today’s technology will not make humans obsolete but will become normal ways of doing business, Chin adds. “How well financial firms adapt and evolve will determine who succeeds in the digital age,” he says. “At Refinitiv, we remain committed to providing traders with data and the technology to power the future of trading.” 

Trade ideas have morphed into idea discussions that often include interactive charts and historical data that both sides view, adjust and mark up in real time, McPartland adds. “We and others have written about the ‘digital native’ generation coming into the market and the impact that will have on the trading desk. We have news for you: that time is now - and the digital generation and their ability to collaborate in real time without speaking is upon us,” he concludes.


The full report is available here:


Jill Sigelbaum

The blend of technology, people and innovation in FX

The report’s key findings provide an important roadmap for all in the FX markets. e-Forex speaks to Jill Sigelbaum, Head of FXall, Refinitiv about how technology and people can together build a more efficient and robust industry, even in light of the current crisis.


In the FX market, how significant is the blend of people and trading technology which you describe in the report?

Similar to other highly-electronic asset classes, technology is not replacing humans in FX, but rather enhancing their trading workflows and helping them make better-informed decisions. The market has now largely shifted from voice execution to electronic execution as market participants sought faster, lower-cost, and more transparent execution methods. By some estimates electronic trading accounts for over 60% of all FX trading volumes, with some instrument types reaching an even higher percentage; for example spot FX, where over 70% of the market is electronic. FX traders are increasingly able to digitize and automate their workflows by leveraging technology across the entire trade life-cycle.

What are the benefits to FX of greater levels of automation, particularly in taking over labour intensive but mundane tasks?

Buy-side traders are become more sophisticated and are continuously seeking smarter ways to access liquidity and achieve operational efficiencies on the trading desk. Achieving greater levels of automation has been a key focus for many of our largest buy-side clients. Expected benefits of greater automation include allowing traders to focus their time on more value-add tasks or more complex trades (whether larger in size, or for illiquid currencies). Furthermore, middle- and back-office functions benefit from greater automation of trade processing. While some of the most advanced buy-side firms may look to build fully automated trading systems in-house, for most players on the buy side, automation will be available to them via electronic trading platforms, such as FXall. 

How can technology innovation help to improve the services offered to the buy side and their relationship with FX service providers?

For the first time in years, after a decade of unprecedented change in foreign exchange, the industry has finally reached a point where the bulk of regulatory implementation is complete, freeing up participants to concentrate on innovation and business growth. With both MiFID II and the FX Global Code now well on their way to achieving their objectives of enhancing conduct, fairness and transparency, there are now exciting opportunities for FX technology providers to advance into new areas, for example tapping algorithmic execution and transaction cost analysis (TCA) to achieve better results for end investors.

What is the future for the relationship between people and technology in light of the specific impact of Covid-19 on FX trading?

The Covid-19 crisis has really put our clients’ FX trading continuity plans and technological readiness to the test. Starting in March, and particularly through April as market conditions deteriorated, FX trading professionals endured a tremendous amount of pressure on their trading operations, technology and infrastructure, as a majority of them shifted to working from home. In this context we’ve been working very closely with our clients, actively reaching out to them during their shift to virtual office environments to ensure we can understand their BCP arrangements and help them achieve practical and appropriate solutions where needed. Going forward, we expect buy-side traders will continue to favour platforms with the greatest breadth and depth of services, especially as desktop real estate remains limited. 

Another differentiator will be the ability of FX service providers to provide traders with the data and insights they need to navigate changing market conditions. In the wake of the Covid-19 crisis, we did just that, reacting quickly to make spread data from our RFQ platform directly available to clients.