Stay informed, be empowered, and remain competitive in FX

In their second discussion of the foreign exchange market, Simon Gregory and Rowland Park, Co-Founders of Limeglass, look at how effective dissemination and personalisation of research is vital across all sectors of the FX industry.

Read part one: Are you maximising your financial research in FX?

There is no doubt that automation has brought huge efficiencies and a different mindset to the FX industry since the advent of eCommerce and algorithmic trading. Speed of execution, price transparency and cost-savings are great consequences of digital FX. Indeed, algorithms are continually being developed with a requirement for new inputs and research can be added with systematic tagging.

Yet, automated, execution-only trading is not beneficial all the time. Research and information-based advice, either on a macro portfolio, or deal by deal basis remains a key value proposition. Proprietary information held in research is an important differentiator for transaction and fund performance, and critical for client service.

Algo and digitally managed trades still require to be monitored by human oversight with relevant FX market experience combined with key influencing market factors. In such a fast-moving and highly liquid market, the pre-set parameters in an algorithm that provided good returns a few days previously may need to be refined if there has been an abrupt change in market activity. What was the cause of the change, was it a one-off, or part of an emergent trend? Timely access to the right information allows digital risk managers to act swiftly and diligently based on insights from their corporate peers in research.

The upshot is, that although algorithmic trading plays an important role in the FX market, it should be complemented by human intervention and this in turn needs to be supported by relevant information, gleaned from available, high quality and timely research.

To compete and stand-out from competitors, research, and its application in a business’s value proposition has to become more personalised and part of an institution’s digital strategy. There has been little progress in the financial research space in recent years, but technology and innovation are now enablers of change. In any market, institutional traders and corporate leaders need to gain insights upon which they can act. In the FX industry, the high volumes and fast-paced nature of trading make this all the more necessary.

To do this, unstructured reports need to be dynamically and instantly transferred into useful structured material so that it can be distributed in a personalised manner and accurately obtained by its recipients at the moment insights are required. By applying smart tags to paragraphs within research documents, relevant topics, such as ‘US elections’ can be surfaced from not one, but a multitude of documents in a single action, generating insights on the macro view of the market down to the most granular snippet of insight.

This not only enables a convenient mechanism for consuming reports but also means that the results are pertinent and relevant, therefore personalised to the user. Naturally, a tailored provision of material will better equip any trader, salesperson or investor to quickly assess reports and discover the information they actually need to make the best decisions. 

Additionally, for the research publisher, this approach provides valuable metrics and insights on readership to ascertain not only which reports were read, but which specific parts of individual reports were deemed most significant or of value, providing easily identifiable feedback that can guide the creation of future publications.

The ability to refine output should lead to customer satisfaction and loyalty by the recipients of the reports. These symbiotic gains in value for both research consumers and producers have an amplified positive effect on the value to clients and thus the commerciality of their respective business units.

Greater operational choice in FX trading has led to a wider variety of participants. Segments of the markets are blurring with banks, and financial firms that are already competing with each other risk losing market share to new incumbents. Institutions need to differentiate their offer from competitors to show their unique value. A holistic view is required, to provide leading propositions, which includes a strategic eye on research.

Recent increased volatility and activity in the currency markets also highlights a need for quick access to time-sensitive information when it is needed most. Participants should be able to extract the valuable insights sought from the research reports at the very instant it is required.

The smart use of existing research is a transformational shift away from the ‘not knowing what you don’t know’ scenario, to discovering new information that can have a key impact. It surfaces the latent value of existing content allowing teams to access information that historically would have been missed.

Research providers can harness the power of atomised documents to open up new opportunities. For example, reports can be linked to execution platforms at paragraph level so that relevant research is automatically, dynamically and intuitively available at the point of trade, and hidden insights become part of the trade decision process. Additionally, email alerts and/or notifications can ensure that the customer is automatically kept up to date with tailored research. Technology enables a more personalised product to research consumers, leading to increased customer loyalty, and therefore to ongoing business success.

Ultimately, through the adoption of smart technology, financial research becomes a strategic tool. It provides a competitive edge for market participants who grasp the emerging opportunity and realise that digitally enhancing their research should form an essential part of their wider technology ecosystem.