Enthusiasm for FX, Crypto Adds to Trading Network Needs

By Steve McConnell, BSO

The upswing in US traders’ enthusiasm for FX futures and emerging markets investments not only boosts trading volumes but puts greater requirements for low-latency connectivity on trading networks worldwide. Recent volatility across FX and commodities through 2018 presents significant market making opportunities for the expanding base of U.S. trading customers, with a concurrent rise in traders’ requirements for capacity and connectivity.

Factors affecting rapid market growth include the widespread rise of cryptocurrency trading and significant inflows into Asia currency markets, which, combined, have spurred global demand for fintech applications and infrastructure. This marks a major evolution over the past five years, when the market was dominated by the major tier one banks, and FX was mostly an OTC market. Although electronic trading was prevalent, there was little demand for low latency, more stable connectivity, as banks opted for meshed connection integration points where needed.

But now, as traders and technology service providers prepare for the mid-October FIA showcase of the industry’s state of the art offerings, the importance of uninterrupted, low-latency connectivity has never been greater.The growth of global data pools, an increasing number of locations where data can be accessed and stepped-up competition means market participants must track down where the pools of data lie – and then be the first to get access.

The proliferation of trading operations in North America depends in large part on high-speed, low-latency connectivity between traders and data hubs in the three key data centers of New York, London and Tokyo. Technological capability, in this instance, comprises a crucial part of success in an arbitrage strategy, for example.

In a market environment that relies heavily on algorithmically derived activity, the baseline requirements for technical infrastructure continue expanding as FX and commodity trading operations of all sizes keep pace with equity trading growth. The need for robust and reliable connectivity continues to grow. The links between traders, data centers and major markets, and the need for backups of fiber and radio frequency networks are vital for veteran and new market participants alike.

As the appeal of entering these markets grows throughout North America, market infrastructure providers need to be ready to respond as fast as the FX and commodity markets move. From increased bandwidth to assured reliability, diversity and availability of links, they must be ready to provide scalability and increased sophistication to global trading markets.

Steve McConnell is US Head of Sales at global network provider BSO.