Retail FX Trading Goes Algorithmic

Terry Flanagan

Retail investors are gaining access to the same foreign-exchange trading tools and capabilities that had been the exclusive realm of institutional market participants, primarily because cloud-hosting costs are low and open Application Programming Interfaces (APIs) make trading more accessible.

That’s the view of Trevor Young, vice president of product management at trading platform Oanda.

“It’s not just a FIX API to a large bank that can get access to this type of thing,” Young said. “People are moving more into the algorithmic trading and the automation of these types of strategies.”

Oanda is primarily a retail forex broker, and was one of the first such brokers to publish foreign exchange rates that on the interbank market, according to Young. Then shortly after, it built one of the first electronic FX trading platforms.

“Oanda has been very disruptive and innovative on the technology side,” Young said. “One of the key foundations that the company was founded on was to take a market like FX, that at the time was restricted to the large financial institutions, and open it up for the average retail investor, and be very transparent about the costs and the pricing. At a time when there were very large spreads for anybody who was outside of the interbank market trying to get in, Oanda offered very tight spreads.”

As vice president of product management, Young is primarily focused on web and desktop trading interfaces to Oanda’s mobile apps and API interfaces for automated trading. In addition to FX, the company allows trading on precious metals and commodities, as well as indices.

“In the US, you can’t trade any commodities or indices as a CFD [contract for difference] product,” he said. “But in Asia, the UK, and Canada, you can trade the S&P, you can trade the Nikkei, the FTSE, and a number of other products.”

FX markets have slowed in the past year, so that volatility’s been low, and volumes have been dropping. “If you look at any of the numbers from a lot of our competitors and public companies, we’re probably aligned with that,” said Young. “The last few weeks have been really good, so things have been picking up a lot.”

On the platform side, one of the trends that Young has observed is that “automation and algorithmic trading is becoming more and more popular in the retail side, specifically, which is a little bit different from the institutional side.”

Oanda has released an open API to encourage “building everything from social copy trading platforms to very specific gold strategies or something that’s catering to the Japanese market,” Young said. “We’re opening up that ecosystem a little bit and we’re seeing a lot of traction from partners that are developing on top of our environment.”

In North America, investors tend to be less FX-savvy. “They’re more interested in equities and options, whereas in places like Singapore and London, FX is very much more top of mind,” Young said. “In those areas, we tend to look at the more professional trader, the guy that’s doing this full time from home, sitting in front of six screens or something like that, whereas in the US, it might be somebody that’s trading on their mobile casually part time.”

Featured image via iStock

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