Tuesday, September 29
Skinners’ Hall, London
Why Buy-Side Firms Are Rethinking FX Infrastructure
For years, FX has occupied an unusual position on the trading desk. For some firms, particularly macro and systematic investors, currencies are an important source of alpha. But for many others, FX is a necessary consequence of investing across global markets—an exposure to manage rather than a strategy to pursue.
That dynamic has contributed to FX often operating through separate workflows and specialist front-office infrastructure. The market is complex, fragmented and not always well understood outside dedicated trading desks. As buy-side firms increasingly trade across asset classes, that separation is becoming harder to justify.
A trading strategy in rates, commodities or equities, for example, may have an associated FX component, while macro strategies can require traders to move quickly between markets. As a result, firms are reconsidering whether distinct execution environments for each asset class still make sense.
Our whitepaper, Bringing in FX: EMS Consolidation in a Complex Trading Environment, explores this shift. Based on independent research by Acuiti, the study surveyed 65 hedge funds, proprietary trading firms and asset managers on the challenges and opportunities of consolidating FX and listed derivatives execution management systems (EMSs).
A Changing Role for FX
The traditional separation between FX and other asset classes is a result of the structure of the market itself. FX remains a highly fragmented, over-the-counter (OTC) market built around bilateral relationships and multiple liquidity pools.
Specialist platforms have evolved to manage that complexity. But as trading firms expand into new strategies and asset classes, maintaining separate systems can introduce a new set of challenges.
Multiple workflows increase operational complexity. Position and execution data can sit across different systems, reconciliation becomes more resource intensive, and traders may need to move between applications to execute strategies spanning multiple markets.
These challenges become more pronounced as firms scale and can become particularly important during periods of market volatility, when speed, visibility and the ability to act across markets matter most.
That shift is one reason we have expanded our FX capabilities, bringing OTC FX alongside listed derivatives within the same trading environment. The goal goes beyond adding another asset class; it is about reducing workflow fragmentation and helping traders operate more effectively across markets.
The Real Value of Consolidation
One of the most striking findings from the research is that consolidation is not primarily a cost-cutting exercise. Among respondents, the most frequently cited benefit of consolidating FX and listed derivatives on a single EMS was a unified, real-time view of risk.
That matters as firms increasingly trade across asset classes. When positions, exposures and execution data sit across different systems, building a complete picture of risk becomes more difficult. A consolidated execution environment can reduce those data silos and give traders greater visibility across their trading activity.
Respondents also cited improved execution quality and expanded algorithmic capabilities among the key benefits. The findings suggest firms increasingly view consolidation not just as an operational efficiency play, but as a way to improve execution.
Consider a trader managing a relative-value position between U.S. Treasuries and German Bunds who also needs to manage the associated EUR/USD exposure. Bringing those instruments into the same environment can provide greater visibility into the overall position and help manage the different legs of the strategy more efficiently.
A Broader Shift in Trading Operations
The move toward multi-asset trading continues to gather momentum across the buy side, but there is no single operating model.
Some firms are encouraging greater collaboration and information sharing between traders with expertise in different asset classes. Others retain distinct trading teams while consolidating functions such as technology, execution management and risk oversight.
Either way, the underlying question remains the same: where does maintaining separate technology genuinely add value, and where does it simply create another barrier between markets?
Our research suggests more firms are concluding that FX does not need to exist as a separate technology island.
Bringing FX and listed derivatives into a more unified trading environment has the potential to do more than reduce cost and complexity. It can improve visibility across positions, enable more efficient execution and make it easier for firms to pursue strategies that span multiple asset classes.
At TT, we’re addressing that shift by bringing OTC FX alongside futures and precious metals on a single screen on the TT platform. TT FX gives you access to spot FX, forwards, NDFs and swaps alongside listed markets, with integrated liquidity and execution tools within a multi-asset workflow.
As trading becomes more multi-asset, the infrastructure supporting it needs to keep pace.
Read the whitepaper to explore the research and what the shift toward a more unified, multi-asset approach could mean for your trading.
To see how TT FX brings OTC and listed markets together within a unified execution environment, contact us today.