That’s the conclusion of trading and foreign-exchange heads surveyed by the organisers of the TradeTech FX conference in Miami. Of the 100 North America-based respondents, 94 said they aimed to automate more of their foreign-exchange trading operations in the next three years.
The market is embracing electronic and algorithmic trading, and Coalition Development Ltd estimates that from 2012 to 2016 banks cut front-office sales, trading and research headcount by about a quarter in Group-of-10 foreign exchange. Automation has also gained favour after some of the world’s biggest banks were entangled in currency-rigging scandals that resulted in more than $10bn in penalties. Last month, a former HSBC Holdings executive was the first individual to be convicted for front-running after the revelations prompted investigations around the world.
“These scandals just accelerated that move” toward technology which enables investors to execute orders online and get better prices more rapidly, said Paresh Upadhyaya, a portfolio manager at Amundi Pioneer Asset Management, which oversees about $83bn. “It gets people a little nervous and more accepting of regulations,” said Upadhyaya, who also sits on the conference’s advisory board and participated in the survey.
The poll shows market participants still have room to increase the amount of trading that steers clear of humans, with 62% of respondents having automated a quarter of their flows or less. Just 8% said automation accounted for more than half their flows.
“It’s an irreversible trend,” said Upadhyaya. “The focus in money management clearly is best execution for our shareholders, and it’s also important to keep expenses down.”
The biggest priorities for currency trading desks, apart from best execution, are:
n Re-evaluating broker and counterparty relationships (54% of respondents).
n Finding alternative methods to source liquidity (49%).
n Reducing costs (47%).
n Regulation has had an overall positive effect on capital markets in the last decade (64% of respondents agreed with this).
n London will lose its status as the global FX capital after Brexit (77% of respondents agreed).
Symbols for Canadian dollars, UK sterling, and euro currencies sit on a board outside a foreign exchange dealer in London. Automation has also gained favour after some of the world’s biggest banks were entangled in currency-rigging scandals that resulted in more than $10bn in penalties.