FX Analytics Demand Soars
Spurred by Eurozone crisis, firms are stocking up on pricing software.
Demand for robust front-and middle-office technology for FX options is increasing as the asset class joins equities and fixed income in platform creation.
Rapid increase in the use of FX options is being attributed to the heightened volatility in international currency markets, and the increasing need for corporations to review their hedging strategies in times of increasing uncertainty in the Eurozone.
“The volatility of the foreign exchange markets are driving the demand for FX options analytics,” Richard Brunt, global head of FENICS and market data services at GFI Group, told Markets Media.
The rise in the volume of FX options is part of a broader trend of corporations updating their hedging strategies owing to the uncertainty in the Eurozone. FX options are now increasingly the strategy of choice as they provide much more flexibility and protection against the volatility.
“The FX Options market place is open 24 hours a day, 5 days per week.,” said Brunt. “Options trade over the counter as well as on exchanges and cover a wide range of products from plain vanilla puts and calls to exotic classes. The ability to monitor the Greeks–delta, gamma, vega, theta, rho–in such a dynamic market is key to a successful trading strategy.”
FENICS Professional gives traders the tools to be able to monitor and analyze the risk profile of their options positions in real time.
“FENICS Professional is a powerful front, middle and back office platform for pricing, analyzing, and managing FX options,” said Brunt.
“An end-to-end solution, it provides all the necessary tools, math models and independent market data for fast, accurate price discovery and revaluation of vanilla options and exotic multi-leg, multi-currency strategies,” he said.
New York’s Hap Capital has licensed FENICS Professional for use on Hap Capital’s FX Options Desk in New York.
“FENICS Professional provides us with the accuracy, ease of use and scalability we require to support and grow our business,” said Andrew Dexter, head of FX options at Hap Capital. “After evaluating numerous systems for FX Options that cover pricing, risk management, and transaction processing, we decided that FENICS was the best choice.”
Misys, a global application software and services company, said an analysis of client activity using Misys Confirmation Matching Service (CMS) in 2011 compared to 2010 shows a rapid increase in the use of foreign exchange (FX) options by its corporate and fund management clients.
Taken from the activity of 130 of its more than 1,000 global clients, including all of the top 10 foreign exchange banks, Misys analyzed the amount of options matched through its CMS solution and found that from September 2010 to September 2011 there had been an increase in matched trades of over 100%.
Algorithms have become more prevalent in the spot FX market.
Global Foreign Exchange Committee has made recommendations on Last Look.
There is a growing demand for transparency in FX trading by regulators.
CLS has also enhanced its existing suite of alternative FX data products.
FX Global Code sets out good practice for last look and provides illustrative examples.