The October Forex Summit draws From Boston Technology’s expertise on how to choose a Liquidity Provider, cyber threat worries covered at SWIFT’s SIBOS conference in Boston and a popular risk management tool aptly named CurrentRisk. We’ve also covered news items, trends and issues that impact the forex world.~ The Editors
Picking the Right Liquidity Provider Takes Asking the Right Questions
It’s no secret; most companies contact at least three liquidity providers before making a final decision. In DivenFX’s case, for example, the company chose Boston Prime, a partner of Boston Technologies as its liquidity provider after an extensive review. Explained Roman Mernyi, director of DivenFX, “We are known as free EA and EA hosting providers [and] we’ll work only with cross-connected providers that pass our complicated execution verification tests.
Boston Prime was able to adjust its systems to facilitate better trading conditions for our high-frequency EA users.” Commenting on what FX companies, banks, and asset managers must consider when choosing a liquidity provider, Anya Aratovskaya, who has been with Boston Technologies for three years and is an authority on Eastern European FX companies emphasized, “Searching for a prime broker or a liquidity provider should be the defining challenge in building a successful model of a new or existing business.”
Aratovskaya has helped numerous companies with their liquidity provider selection. She says the decision should start with some introspection, “In the beginning, you should be certain about WHAT market participant you or your company represents—an individual trading for himself, an individual or company trading its own funds or those of investors or a brokerage company offering forex?” As further guidance, Aratovskaya has prepared several questions that need to be answered as part of the decision-making process.
● How do I trade?
● How long have I been in business, and with whom or what have I already worked?
● How much profit do I make per month (standard lots)?
● What amount per click do I usually send in the market?
● What are the details of my trading style (regarding trading for customers)?
“This question may seem tactless, but it is extremely important. You can save a lot of time by stating at the outset that you are an investment fund using high-frequency strategies, thereby reducing the number of potential suppliers,” Aratovskaya points out.
● If I am trading using algorithms, do I have a server in the main data centers?
● What platform do I use for trading (your own and trading via FIX API, MT4, cTrader and so on)?
When Marina Mikelsone, chief operating officer of E-Global Trade & Finance Group, Inc. was seeking a liquidity provider, she established and communicated her criteria in detail, “As a big international broker we were looking for a regulated liquidity provider that could handle all the aspects of the STP execution (stream liquidity, manage MT4 bridge). Working with the same provider for liquidity and technology is cost effective and provides additional monitoring security for our clients.” “This is how I see a perfect letter or information for a conversation with a potential liquidity provider,” said Aratovskaya:
Hello, my name is Sergey. I’m the director of the investment fund Invest Sergey. We are registered under the Cyprus jurisdiction to perform investment activities.
We have been in the forex business since 2013, and we concurrently export and import olive oil. We trade only EURUSD and sometimes AUDNZD, 30-40 lots-per-click usually in the Asian session and hold from 10 minutes to a couple of days.Aratovskaya offers more detailed questions and topics to discuss with any future liquidity partner:
How many trading interfaces does the Prime Broker offer?
If the broker offers more than five platforms, it is worth considering the size of the company. Brokers should have very large teams to provide support for all these interfaces.
What about configurable trade flow?
Some systems are sensitive to spread, some to unfiltered quotes. How easily will the prime broker be able to simulate the trade flow that is convenient to the client?
What are the statistics on negative and positive slippage?
This important, determining component will allow you to precisely calculate your future profit or loss. These statistics also allow you to objectively assess compliance with the proposed conditions of the liquidity provider. Ninety percent of the trades executed without slippage can be only under the condition that the statistic is based on a nonvolatile timeframe of a few hours.
Do you provide the location of data centers and open disclosure of latency maps?
If you live in a small village in Siberia and do not have a VPS server in a data center of the liquidity provider, do not count on a 200-millisecond execution. She concludes, “This is a standard list of questions one should ask. During the conversation, the nuances will be identified, and as a result, a long-term productive and cooperative relationship will be established. Good luck in your search!” Boston Prime is FSA authorized and offers ultra-competitive spreads, executes with low rejection rates, supports its customers with a knowledgeable technical team and offers a strong partner network to round out its offering, according to the company. Contact information is at: Boston Prime, BT partner, a Prime Broker.Anna Aratovskaya may be contacted at: email@example.com
Cyber Attacks are Here to Stay
By Dick Pirozzolo
While JP Morgan Chase & Co. along with retailers Home Depot, Target and TJX Corporation get all the press attention when their systems are hacked, FX brokers, liquidity providers and traders are no less vulnerable.
Cyber attacks are here to stay. That’s how delegates at SIBOS 2014 in Boston see it. During this annual bank technology conference organized by SWIFT, 80% of financial professionals polled during a session on cybercrime believe attacks are unavoidable. When moderator Ben Rooney, co-editor-in-chief of Informal and a former Wall Street Journal financial reporter, asked the group: ‘how likely is it that your institution will be a victim of a cyber crime in the next year?’; 44 per cent voted ‘very likely’ and 26 per cent ‘likely.”
In addition to greed as a motivator, especially from Eastern European crime syndicates, cyber attacks emanate from nation states, terrorist groups and activists who see computer hacking as a form of protest.
Heather McKenzie writes in her recent article titled Silver Lining in Banking Technology, “Financial institutions are increasingly required to collect, store, analyze and report on ever increasing volumes of data. Cloud computing is an attractive option because it enables firms to bypass sizeable investments in infrastructure, hardware, software and maintenance typically associated with data storage. The convenience and cost effectiveness of cloud computing have to be weighed against the security concerns.” For example, the illegal release of nude photos stored on Apple’s iCloud has turned “the cloud” and its suspected vulnerabilities into grist for the gossip mill.
Nonetheless, Jubin Pejman, FCM360’s managing director, believes the cloud is safe, but financial institutions toy with disaster if they rely on a public cloud such as Amazon’s. “It’s the wrong environment, risking exposure of sensitive financial data to everyone from individual criminals to rogue governments like North Korea and even our own government surveillance.” FCM360 specializes in global infrastructure for the forex industry, which includes a specialized Financial Cloud service to allay these risks.
Despite worrisome security undercurrents, there are some positive trends. Citi’s Charles Blauner, global head of information security and chair of the Financial Services Sector Coordinating Council, observed the growing use of mobile devices will eliminate vulnerabilities associated with passwords. “I’m big on mobile banking,” he told the SIBOS delegates. “Ten years ago when we talked about biometrics, we would have had to send a video camera to every customer. I have a smartphone now; it has a lens for facial recognition, a mic for voice recognition and the iPhone can record a thumbprint. A breach is a lot harder with this device and it is hard for the criminal to scale. Bringing biometrics into the mass market is a huge game changer.”
However, experts tell us, smartphones have prompted a proliferation of applications, any one of which can provide a gateway into a major institution’s computer system. There is no formal system for having new apps reviewed by security experts.
Anders Corr, founder of New York based Corr Analytics, reviewed the current spate of cyber risks for Boston Global Forum members at Harvard University in October as well. Corr noted that the biggest cyber heist in history was in 2013 when Ukrainian and Russian hackers made off with $300 million dollars affecting Nasdaq, Visa, JC Penney, Carrefour SA and Jet Blue. In contrast the average U.S. bank heist nets $7,500 as reported in U.S. News & World Report.
According to Corr, the US Federal government spends about $20 billion per year on cyber security, including both offensive and defensive efforts. Other NATO countries spend approximately another $10 billion per year. But these levels are only 3% of NATO defense spending, and are clearly insufficient for the task of defending against cyber threats emanating from Russia, China, Brazil, South Africa, and other havens for cyber-terrorists and criminals. He believes NATO cyber-security and cyber-warfare spending should rapidly increase to 5-10% of the defense budgets of all member countries.
Despite the vastness of the threat, Kris Lovejoy, general manager of IBM’s security services division, explained that individuals taking security precautions markedly reduces the risk of breaches. “This is much like the way hand-washing reduces the number of classes schoolchildren miss.” She said adding, “Most folks we work with have, at some time, been personally compromised,” and, “90 per cent of the time the bad guy got in because he exploited an individual who double-clicked on the wrong thing.”
CurrentRisk Catches Unreconciled Trades and High Risk Exposure
To ensure that trades and orders are reported correctly—in both client and broker accounts—real-time trade reconciliation is an absolute must. With this mind, CurrentDesk was founded and with it came the introduction of its first product— CurrentRisk, an independent reconciliation platform that lets traders automatically manage the entire lifecycle of a trade in real-time. CurrentRisk software collects data from prime brokers, liquidity providers, bridge providers and trading platforms, with the information simultaneously displayed in a clear and easy to use format. Based in the United States, CurrentDesk was founded and is run by partners Ron Singer and Travis Dahm. The company prides itself on delivering platform-independent software that has been created by specialists with extensive broker experience.
We recently caught up with Ron Singer and had a chance to ask him about his company and CurrentRisk.
Where did the idea for CurrentRisk come from?
My business partner Travis Dahm and I were hired to consult on a project that involved setting up an institutional forex broker. One issue that continually arose was unknown exposure due to third-party technology failures. We realized that the industry needed a solution to this problem and we began to discuss ways to eliminate these exposures. CurrentDesk was born out of these discussions, and with it our first product: CurrentRisk.
How does CurrentRisk solve the exposure problem?
When we began doing our research, we discovered that existing real-time solutions only reconciled from the bridge to the liquidity provider. With the evolution of personal trading platforms, a new leg in the life cycle of a trade had been created—from the client-trading platform to the bridge. No one was reconciling this leg of the trade and we saw a need. CurrentRisk solves this issue by reconciling all A-Book trades and monitors A-Book positions from your front end and liquidity providers. Now, whenever an exception or exposure occurs, audio, visual, and email alerts are instantly triggered.
Was there a Eureka moment in the development process?
While I have a background in computer science, I had not done much development in the past 10 years. However, during my free time I starting building a test model for reconciling the entire life cycle of a trade including the new leg I just mentioned. It worked ok, but it was not real-time. I knew a real-time solution is what we needed to create and dove in to create it.
How did the introduction go?
When CurrentRisk was initially introduced to the market, the reception was not what we expected. At that time most brokers were running B-Books so they didn’t seem to care about risk that they didn’t know they had. However, the market has since evolved into an A-Book-driven model where clients look for tight execution and assurance that their trades are going through to the market. With this new model, brokers now realize their margins are much tighter. Even a minor exposure can cost them a significant amount of equity. The product is taking off.
Any improvements based on customer input?
One thing that is so great about CurrentRisk is that we are constantly refining the product based on client feedback. Two major improvements stand out. First, we updated reporting to include analytics on a richer set of data such as execution times and slippages. Second, since brokers are now running a hybrid model of A and B-Books, our B-Book Monitor allows the broker to set alert parameters based on max profits and losses, among other options. This helps them manage associated risk.
How was your company CurrentDesk founded?
After long discussions we began to perceive a clear vision on how to improve and empower brokers. Motivated by this vision we decided to team up to develop two specific pieces of software that we wanted to bring to market. CurrentRisk came first. We also created CurrentBusiness, our broker management software suite that includes a complete set of tools to help brokers manage their business. CurrentBusiness provides a client portal, partner back office, and administrator access to a rich set of tools such as treasury, support, sales and compliance. Along with being platform independent, CurrentBusiness includes full Customer Relationship Management (CRM), lead and transaction management, and much more.
Tell us a little more about your background?
After completing a master’s degree in computer science, I started my professional career as an IT consultant building ERP systems. Later, I returned to McGill University and graduated from their MBA program with specialization in corporate finance and money markets. I then moved to Europe to take on the role of sales-trader with Saxo Bank A/S. Soon after I was offered the role of Head of Sales Trading with Varengold Bank AG. This combined experience in both financial markets and software development has provided me with a distinct advantage to develop software for brokers. Out of all this CurrentDesk emerged.
Asia Pacific Markets
Volumes Rise Across Main Exchanges in the Asia-Pacific Region as Volatility Picks Up
Three of the most important financial centres in the APAC region have reported positive monthly operating metrics. Volumes were up across the board in September with Japan’s equity bourse outperforming its rivals. Exchanges in Japan, Singapore and Australia have boosted investor confidence in the region after reporting an uptake in trading activity. The three exchanges saw positive flows across various segments, including equities, futures and options.Find our more at: Forex Magnates.
Sanctions propel Russia towards Asia
Sanctions over the conflict in Ukraine have closed off western capital markets to some Russian companies, giving Asia an opportunity to take a greater role. But an easy ride in the east is not guaranteed. Russia’s embrace of international capital markets since the end of the Cold War has at times been hard to believe. A country previously pitted so aggressively against capitalism has seen companies across its economy venture out into the world for stock listings, bond deals and acquisitions, signaling its enthusiasm for red-blooded dealmaking. The Full article by Rob Hartley appears on EuroMoney.
Yen rises on global economy worries
“We are now in a crucial level,” says Osao Iizuka, head of trading at Sumitomo Mitsui Trust Bank. “If the dollar-yen rate doesn’t break below well-established downside support of 107.50, it would be good to conclude the (dollar-yen) adjustment is over.” In recent weeks the dollar has hit multi-year highs against the yen and euro as strong US data fanned expectations of a rate hike sooner than later. Read more in: The Economic Times
Thomson Reuters Launches Direct Feedto Attract Algorithmic Trading Firms
The new Elektron Direct Feed, based on Celoxica FPGA hardware acceleration technology, will deliver a standardised, full tick, full depth solution initially only for US cash equities but its cover will expand…
FX Events and Webinars
Get Into The Chinese FX Market
FXIC SHANGHAIis a premier event for introducing global brokers, solution providers, money managers to the Chinese FX and binary option market. In-depth information on the local market as well as networking opportunities. Co-hosted by FXShell, the leading FX B2B portal in China, and Shift Forex, a New York-based FX consulting firm.Details and Registration.