Foreign exchange trades occur all around the world, and there is no shortage of venues in which these over-the-counter transactions can occur. What the buyside really needs is a way to assess all of its pricing options in venues all over the world so it can get the best execution available. Such transparent FX trading could soon even become the norm.
At least that’s the view of Vikas Srivastava, managing director of business development for the FX trading network firm Integral. Srivastava began his career on the buyside, rising to become the head of currency trading and risk management at Barclays Global Investors (now a part of BlackRock). While on the buyside, he wanted to be able to look at all of his trading options at once.
That used to not be possible. It wasn’t long ago that currency traders relied chiefly on quotes given over the phone. Even as electronic quoting and trading gained sway, it was impossible to take into account all of the venues in this extremely fragmented and global market.
At Integral, Srivastava is trying to help buysiders get a view of as many trading partners as possible using the firm’s currency trading system InvestorFX.
“We’re able to deliver to customers their current direct trading relationships as well as other sources of liquidity, and with the power of the computers, we’re able to put together all prices in real time, rank order everything, and create a custom book for them,” Srivastava said in a conversation with Traders Magazine. “It took us a long time to get here, but our platform allows people to run their businesses the way they want to run their businesses.”
Integral offers a connectivity network linked to various entities, including brokers, banks, investment management firms, hedge funds, and corporates, and provides tools to help clients decide where in that network they want to trade. The network is combined with Integral’s execution managment system, which allows customers to see which players are available to trade with and to customize how they want to interact with those potential counterparties.
Srivastava likens the firm’s tools to a glass-box algo rather than a black-box algo. That’s because they allow users to see what is going on and to control it. If there are certain counterparties with which they would rather not trade or will only interact with under certain conditions, they can adjust the settings. It’s the kind of transparency he says he wishes he had when he was on the buyside.
Srivastava sees increased transparency as the wave of the future for the foreign exchange industry. Part of that is due to the Dodd-Frank Act, which regulates a couple of currency products, as well as from small initiatives by European regulators. Volumes in the regulated offerings are relatively small when compared with the massive OTC foreign exchange industry, but Srivastava predicts the transparency in those products will spill over into other areas.
“Once as a buyside trader you get a taste for having all that transparency in one product, you might want to demand it in other products too,” Srivastava said. “The impact of the regulations is going to be larger than most people think.”
