e-Forex Magazine reports on isolating the real merits of fully outsourced hosting and FX connectivity services.
Outsourcing something as crucial as management of connectivity infrastructure may create concern through the loss of control, however, as Dan Barnes reports here, it can greatly improve flexibility around cost and market access.
Opportunities in FX trading are enormous, but the risks are also considerable. In the current low volatility environment, the margins likely to be earned via most strategies are slender. Identifying a decent new trading strategy is hard and a miscalculation may not only lose a firm revenue through trading, but any investment in technology and infrastructure is a potential millstone around its neck. However the need for contact with an increasingly broad range of counterparties threatens to push firms into making technological commitments they cannot keep.
“The FX market is increasingly a global market,” says Ralph Achkar, director for product at MarketPrizm, part of telecommunications provider Colt. “If you look historically where people were trading pairs locally they are now doing so more and more over international markets. Even participants who are focusing on certain pairs in certain markets they are actually starting to focus on or expand their reach into other pairs and as a result of that they need global access. The moment you move into global access, what you had focused on regarding your costs and budgets for one region is probably more than multiplied. Regions such as Asia have costs that are far higher than the US and Europe.” The fragmented nature of the marketplace and the considerable growth in electronic trading – estimated to be 70% of volume by the end of 2013, up from 60% the year before, by analyst firm Aite Group – makes issues of connectivity fundamental to supporting efficient FX trading, however the dramatic growth in algorithmic trading has created connectivity challenges for market participants.