360T was once again a proud sponsor of the TradeTech FX conference in Amsterdam, which brought together 800+ senior FX attendees including 300+ of Europe’s leading buy side firms for three days of discussion, debate and networking.
Having participated in one panel session on the main day of the conference, run a series of buy-side-only roundtable discussions on the innovation day, conducted a workshop for corporate treasurers and hosted a party for our friends and partners in the FX industry, these were our top five takeaways from the event.
1. Interoperability comes into sharper focus
2. Incorporating analytics into the decision making process
3. FX automation moves from planning to production
4. Don’t forget sell-side innovations
5. Signs of maturity around Digital Assets
1. Interoperability comes into sharper focus
Interoperability was a key theme at the conference, and this topic was given greater salience given that buy-side firms are increasingly partnering with, and relying on, fintechs. The old build vs. buy debate seems to be shifting in favour of the latter, but we are also seeing more buy-side firms piecing together multiple best-of-breed technology solutions in order to create an optimised FX trading ecosystem.
This might mean, for instance, utilising a cross-asset Order Management System (OMS) at the portfolio level that is connected to a specialised Execution Management System (EMS) for best execution, which also offers access to unique market data and is connected to powerful transaction cost analysis (TCA) tools.
And although these systems might be offered through specialist providers, information needs to flow through all of them in a seamless and automated manner. The most obvious advantage of this approach is that buy-side firms can leverage the best technology available for each function. But an additional one highlighted at the conference was that partnering with fintech firms in this manner enables the buy-side to remain at the cutting edge of innovation. As technology continues to shape how the FX market operates (with all the talk of AI at the conference a clear example of this), to stand still is to risk falling behind your peers.
Importantly, it was noted that specialised fintechs will inevitably have an edge over multi-asset ones when it comes innovating and remaining agile in response to the FX needs of buy-side firms because their development and investment resourced are focused on this asset class.
2. Incorporating analytics into the decision making process
A big topic of discussion at the roundtables that 360T hosted was bank basket optimisation and how buy-side firms make decisions about which are likely to be the most effective liquidity providers for any given trade they need to execute. One potential method of bank basket optimisation is using 360T’s Execution Quality Score (EQS), which is already utilised across our Spot FX offering to help buy-side firms maintain efficiency in their trades without compromising on price. The EQS model ranks banks based on predefined criteria, analysing data to optimise price quality while shaping and reducing the bank basket according to trade economics.
During our discussions it was highlighted that traders are looking for new pre-trade optimisation tools which leverage a wealth of data to put more information in their hands in order to make better, faster and more informed decisions.
Our roundtables played into a bigger theme at the conference, which is that analytics tools are playing a bigger role than ever in driving execution decisions, on both the buy-side and the sell-side.
It seems that everyone is hungry for more data and analytics tools to help them improve trading, and our team found themselves having many conversations about 360T Vantage, our in-house analytics platform, and our recently announced partnership with Virtu Financial to offer integrated transaction cost analysis (TCA) services to 360T users.
3. FX automation moves from planning to production
The desire amongst buy-side firms to automate more of their FX workflows is a perennial topic of discussion each year at the TradeTech FX event, but what was different this year is that there seems to be an increase in the adoption of the technology needed to facilitate this. A representative of one European investment manager speaking on a panel estimated that about 85% of its trading processes could be automated and notes that this is changing the role of the human trader.
They explained that, by automating these processes, they now have more time to spend on different functions on the desk, including conducting more in-depth and sophisticated TCA to help improve execution outcomes.
There was also a lot of talk in the panels about AI. While AI is, of course, a form of automation, we would argue that it is different and distinct from the rules-based automation combined with unique market data that 360T enables today. While the latter is a mature product that is well understood and used by many buy-side firms, the former is still a nascent technology within the context of FX and it’s still not entirely clear what its most effective use cases will be.
Perhaps it’s just the nature of these conferences, and a healthy thing for the FX industry, that everyone is always looking ahead. In this context it makes sense that as more buy-side firms are beginning to automate parts of the FX flows people are starting to already look ahead toward the next potential technological advancement.
4. Don’t forget sell-side innovations
Although TradeTech FX is an explicitly buy-side focused event, it always attracts a large sell-side presence and they too are also looking to understand what trends, tools and innovations are shaping and changing the FX market.
As a result, we had a lot of good conversations at the event about 360T Swaps User Network (SUN). In the last Bank for International Settlements (BIS) triennial FX survey, the global FX Swaps market was put at $3.8 trillion in notional volume traded per day, making it by far the largest segment of the overall marketplace. And given that the BIS survey was conducted in 2022, this figure might actually be higher today.
The size and growth of the FX Swaps market has increased the pressure on sell-side firms to find new efficiencies when trading these products, and that is why we’ve seen an uptick in the usage of 360T SUN.
As the first platform facilitating FX Swaps trading via API with midpoint matching utilising the Swaps Data Feed (SDF), 360T SUN is enabling sell-side firms to fundamentally change how they trade this instrument, delivering enhanced efficiencies and significant cost savings.
With over 50 banks now connected to the platform and growing API trading volumes, it’s perhaps no surprise that 360T SUN was being talked about frequently at the conference.
5. Signs of maturity around Digital Assets
As a regular sponsor of TradeTech FX we’ve been able to observe at various times clear cycles of interest, excitement and skepticism about digital assets from buy-side firms. This year, the approach felt more measured and mature compared to previous events, where the topic of digital assets has either been hyped up or ignored.
There was a keynote discussion in the morning of the first day of the main conference on how to integrate crypto into TradFi desks and then a conference track in the afternoon on alpha generating opportunities in the crypto space. These felt like appropriate topics for the audience, and gave digital assets probably the right amount of prominence within the overall agenda of the conference.
Based on these sessions, and the conversations we had with both sell-side and buy-side firms in and around TradeTech FX, it seems clear that digital assets, and cryptocurrencies more specifically, will find their way (if they haven’t already) into the portfolios of mainly traditional financial services firms.
The question now is more around how these assets will be traded within the ecosystem of the global financial markets, and judging by the comments made at the conference there seems to be a consensus forming that it makes sense for buy-side firms to access them via regulated, trusted and proven platforms.
Pictures by Richard Hadley.