01 June 2008
Fx Markets Require Adaptive Trading-Specific CEP
- Previous generation of CEP unable to cope with today’s trading landscape
- Liquidity-seeking, smart-order routing a reality, not just aggregating venues.
London, 30th June 2008 – Liquidity management in the FX market can only be met
with adaptive complex-event processing (CEP) technologies designed specifically for
trading. This is according to Ali Pichvai, CEO of Quod Financial, the leading provider
of advanced execution technology for the global capital markets.
“In order to achieve a holistic approach to liquidity management, a large number of
events – risk metrics, positions rates, and auto-hedging instructions/orders – need to
be processed to inform dynamic decisions in real-time,” states Pichvai. “The previous
generation of CEP technologies simply cannot handle this volume of complexity. In
order to be effective, CEP engines must natively understand the objects and
relationship between trading events, and order or quoting workflow. This dynamic
approach can only be achieved with adaptive trading-specific CEP, and is essential in
an environment as complex and fast-moving as the modern FX market.”
According to his most recent white paper ‘Adaptive Event-driven trading in the
Foreign Exchange markets’, Pichvai cites adaptive trading-specific CEP as
empowering the FX markets in the four following ways:
- Liquidity/execution management: The optimization of both internal liquidity and
access to multiple trading venues. This is supplemented by pro-active management
of the execution process across fragmented liquidity, commonly referred to as
smart-order routing. Advanced Smart-order routing will be liquidity-seeking, going
after both the transparent, but also (by building in predictive models) the nontransparent
liquidity.
- Auto-hedging/position monitoring: Dynamic monitoring and management of risk
for a given bank, connected to the liquidity management/execution to generate
hedging orders.
- Rate/price management: The management of price/rates for standard and nonstandard
currency pairs, taking into account the desired spread per client. This can
be fully automated with the possibility of partial manual processing.
- Risk management: The client margin calculation and the management of risk. The
holistic approach will have a complete view of the level of margin/credit vis-à-vis the
client for their current position, but also take into account the open orders.
“We have successfully applied our adaptive trading-specific CEP technology to the
equities market for our advanced smart-order router, and are pleased to bring this
technology to another asset class to meet the challenge of FX liquidity management,”
concludes Pichvai.
To obtain a copy of the white paper and to discuss its content with others, please visit
www.quodfinancial.com and visit the site’s interactive comments board.