Roland Hamann,  Managing Director at Pico
Roland Hamann, Managing Director at Pico

Tackling the technology challenge in Asia's FX Markets

While the growth of FX in Asia has been anticipated for some time, the recent BIS Triennial Central Bank Survey has highlighted that Asia is the engine for the global economy and has been the only region with significant levels of growth in recent years with FX turnover in Hong Kong, Japan and Singapore larger than the US for the first time since the survey began.

 Roland Hamann, Managing Director at Pico explains to e-Forex the drivers behind their recent move into the Asian FX markets and how Pico’s unique blend of global services and expertise will help firms take full advantage of the opportunities available in these rapidly growing markets.  

What are the key trends in electronic FX trading in the region and how is Pico responding to these opportunities?

The slowdown of growth in Western markets, coupled with the rise of FX liquidity in Asian markets, has meant that many trading firms, proprietary market makers and hedge funds are now expanding in Asia which is a trend that we have anticipated for some time at Pico. We started to implement our Asian expansion strategy around 18 months ago and this has proven to be perfect timing to ensure we have everything in place to support the emerging opportunities. 

Even so, the Asian FX liquidity landscape remains highly fragmented and the ability to ensure best execution is achieved is now more pressing than ever. We find that our clients are keen to utilise machine learning to provide deep data analytics to optimise trade execution, but had previously been on the backfoot when it came to the resources needed to implement such changes in their technology stack.  

Also our global coverage enables APAC clients to connect within Asia and, via PicoNetTM our low-latency Global Connectivity Ring, into Europe and the Americas and vice versa for European and American firms. Pico offers clients a globally consistent, standardised network, supported by round-the-clock local expertise and support services. 

Many FX trading firms are now expanding in Asia

The use of technology is on the rise and the use of cloud computing in Asia is phenomenal, particularly in financial services. We are working very closely with the largest cloud providers to facilitate connections in and out of the cloud for customers. 

What core areas of expertise and domain knowledge are you offering in the region and how are you able to provide a unique solution to the trading requirements of your clients?

With connections in NY4 and LD4, it was a natural progression to offer connectivity into TY3, SG1, HK5 and HKEX. Our clients expect the lowest latencies and given the majority of electronic trading firms now use machine learning environments and algorithms, it is more important than ever that the incoming data, as well as the order entry traffic, is deterministic both of which are delivered by PicoNet.  

We recognize that firms in the region face barriers to entry when trying to access new markets or sources of liquidity, including cost of access, the need for up-front training and resources, and optimizing time-to-value. We aim to relieve these pain points for our clients -regardless of size or location- by providing local and remote hosting solutions, procurement as-a-Service (including import and export of goods into all covered countries), as well as cost-effective, low-latency connectivity services on a truly global network.

We are entering a new era of FinTech defined by an on-demand and machine intelligent technology paradigm delivered as-a-Service. How do you intend to capitalise on this trend and unlock new business opportunities that result from it?

This is why we recently completed our acquisition of Corvil. We already used Corvil analytics in most of our data centers for our own monitoring, so it was a natural fit for Pico to start offering Corvil’s capabilities to clients as-a-service on PicoNet. For our clients this means that we not only offer them the best of breed technology, the lowest and deterministic latency but now they can also benefit from greater transparency as well. 

We also heavily use automation frameworks from some of the world’s largest providers while also utilizing machine learning technologies on our own platform. For example, we have a really interesting tool - Corvil Intelligence Hub - providing advanced data analytics, which Pico will be offering as a service going forward. Utilizing machine learning algorithms, the amount of information that clients will be able to gain out of Intelligence Hub is staggering. We believe this will be of great interest when it hits the market, especially in Asia where it addresses many of the pain points firms are looking to ease. 

In addition, many financial trading firms now require learning environments and at Pico we believe that public cloud offerings are a good platform for hosting these. As a result, we work closely with our strategic partners to offer algorithmic trading environments in the cloud for our customers. 

We host a large historical tick store in Amazon Web Services (AWS), with nanosecond timestamped packets, which our clients can access and feed their learning environments, either directly in AWS or in other locations. This allows them to train and build their algorithms faster, which in turn lowers their time to market. 

Many FX trading firms are looking to expand into new and fast growing regional markets around the world. How can you help them address and overcome many of the challenges that are involved with this?

We allow clients to focus on the more profitable business of trading

It requires a lot of local knowledge as well as paperwork to move into a new region. Not necessarily something a trading firm has easy access to in-house. Resources are often limited but still require a commitment of time to deploy and familiarise teams with an unfamiliar exchange or new policies.  

Firms may also be unsure whether a trading strategy will succeed and keen to limit initial capital outlay for building out new environments, infrastructure or committing to long-term contracts, especially if they may wish to wind everything down again if unsuccessful. 

We know our clients in the past have had to carefully balance resources between live trading and future strategy environments. At Pico, we enable our clients to move fast and return quickly to focusing on their core strength, trading.

Looking ahead, how ambitious are Pico’s future business growth plans and how important is the Asian market and the FX asset class to these plans?

Our clients require a global technology partner that understands their business. Pico aims to establish a presence in every global financial market data center in order to truly enable access for our clients to every liquidity venue. 

We already offer unrivalled, comprehensive cover globally, and we are now working on connecting even more data centers within Asia and the Middle East. We have already made good progress with a number of new locations added this year and the remaining data centers on track to be added in 2020. 

Our message to the FX community is this. Let us do the heavy lifting with our data, analytics, level of transparency, low-latency, global connectivity services and market-leading suite of solutions, which can also be hosted in the cloud.  We allow clients to focus on the more profitable business of trading and leave the technology development that requires to Pico.

While they might have worked alone in the past there’s really no longer any reason to shoulder the additional workload and distractions that come with establishing in a new market or true global access.