July 2010 visit us at www.e-forex.net welcome to e-FOREX SUMMER 2010 egulatory uncertainty and turbulence in global fi nancial markets will not stop the continuous development of Susan Rennie Michael Best electronic trading technology, which takes centre stage in [email protected] [email protected] R Managing Editor Subscriptions Manager this edition. We have created a new section within the magazine devoted to forex technology which will be highlighting a wide Charles Jago David Fielder variety of topics that don’t easily fi t into other parts of the [email protected] [email protected] publication. Articles in this section will be examining core subjects Editor (FX & Derivatives) Features Manager as diverse as Complex Event Processing, Virtual Networking, Cloud computing and new FX Market Data distribution and storage Charles Harris Simon Moss [email protected] [email protected] solutions. Advertising Manager Commercial Manager Our derivatives feature in this edition is examining how technology Helen Rochford Felix Shipkevich is opening up new trading opportunities and stimulating product [email protected] Contributing writer Regulatory Roundup innovation with electronic FX Options. This article also looks at Production Manager what work is being done towards the development of an ECN ASP Media Ltd for FX Options. There are signifi cant technology hurdles to be Suite 10, 3 Edgar Buildings overcome in designing an electronic ECN which will operate George Street, Bath, BA1 2FJ United Kingdom effectively with FX Options but this isn’t stopping a number of Tel: + 44 1208 821 802 (switchboard) companies who are currently working to solve many of the major Tel: + 44 1208 821 801 (e-Forex sales & editorial) issues involved. Some commentators believe it’s only a matter of Fax: + 44 1208 821 803 time before we see FX Options trading on ECNs so we will be Design and Origination: watching this space closely. Phill Zillwood Design Works [email protected] Our Focus section sets out to explore how new technologies such Printed in the UK by Buxton Press as RIA and development environments such as Flex and Silverlight e-Forex (ISSN 1472-3875) are facilitating the development of a new breed of FX trade delivery is published quarterly in January, April, July and October platforms. The pace of change here is quite remarkable and as www.e-forex.net one of our contributors says, “you can easily fi nd yourself with a Betamax and not a VHS so it’s important that you don’t hardwire Subscriptions Subscription rates (including postage) the technology into the heart of the mainframe.” UK & Europe: £150 per year Overseas: £175 per year Finally, we have put together an article on MT4 Bridging Please call our subscription department for further details: technologies for our Retail e-FX Provider section. Advanced quote Subscriptions hotline: +44 (0) 1208 821 801 aggregation can give brokers an edge and makes a big difference to their profi tability in an increasingly competitive marketplace. This Although every effort has been made to ensure the accuracy of the information contained in this publication the publishers can also applies to risk control and near perfect real time reconciliation/ accept no liabilities for inaccuracies that may appear. The views synchronicity between the MT4 platform and back offi ce systems. expressed in this publication are not necessarily those of the These are all areas in which standard MT4 Bridges have been publisher. designed to provide solutions for. We plan on taking this story Please note, the publishers do not endorse or recommend any further in the next edition by reporting on what products Bridge specifi c website featured in this magazine. Readers are advised to check carefully that any website offering a specifi c FX trading and other developers will be offering for the new MT5 platform. product and service complies with all required regulatory conditions and obligations. As usual we hope you enjoy this issue of the magazine. The entire contents of e-Forex are protected by copyright and all rights are reserved. Charles Jago Editor July 2010 contents FOREWORD Roger Aitken talks to some leading 14. Currency Derivatives: waiting technology vendors to fi nd out more about the latest developments within Manfred Wiebogen John Galanek for the next wave of regulation Currency Derivatives: The search for clarity: the complex world of FX Liquidity Waiting for the next wave Exploring Transaction That lawmakers and fi nancial fi rms are of regulation Cost Analysis at loggerheads over the forthcoming Management. fi nancial regulations is well known. What may be surprising, observes 48. Technology and product innovation: Manfred Wiebogen, is that upcoming opening up new opportunities with FX regulations on OTC derivatives will also Options cover currency derivatives. Where once the more complex options’ structures seemed to be resigned to LEADER remain either RFQ or voice-based, 18. The search for clarity: exploring Frances Maguire discovers how this new frontiers in FX TCA mindset is slowly being eroded as Frances Maguire Roger Aitken Technology & Product FX Liquidity Management: John Galanek highlights how nascent technology advances and the ease of use innovation: FX Options A more pro-active approach demand for Transaction Cost Analysis of options’ systems increases. is bubbling up in foreign-exchange markets and why the need for FOREX TECHNOLOGY transparency into FX costs is starting 60. Beyond the Jargon: The four key to spread to thousands of FX trading elements of technology fi rms. Chip Lowry offers some advice for FEATURES fi rms looking to appoint a technology vendor to optimize their current 24. Risk, Research and Red Tape: FX e-commerce caters for a changing operations or to launch a solution for the fi rst time which involves ordering Chip Lowry Nicholas Pratt demand-side Beyond the Jargon: Optimising FX Feeds: their most important needs into Four key elements of Low latency rate engines Increasing regulation and a renewed prioritized lists. technology focus on risk management, alongside a growing and more demanding buy- 62. Second Generation CEP: laying the side has meant that FX e-commerce foundation stones for enhanced FX providers are enhancing and revamping Trading architectures their platforms. Frances Maguire explores how some of the leading Now that there has been a remarkably players are looking to grow their fast uptake within the FX space for market share. CEP technology among both buy and sell-side fi rms, Roger Aitken quizzes 36. FX Liquidity Management: should leading CEP vendors and experts on Heather McLean Erik Lehtis you be taking a more pro-active the ‘second generation’ landscape and Bridging the gap: Retail Gearing up: High Frequency meets Institutional FX FX Trading approach? where the future lies. A Citi page 29 FXDD page 149 Marex Financial paghe 17 Standard Bank page 4 ACI page 14 CME Group page 95 FX Training Zone page 158 MB Trading page 139 Standard Chartered Bank Inside Front Advanced Currency Cover page 99 Currenex page 11 FX Transparency page 18 MIG Bank page 23 Markets Morgan Stanley page 9 State Street Global Markets page 60 Advanced Markets page 141 D G Streambase page 64 Aegisoft page 108 DeltaStock page GAIN Capital page 4 N SunGard page 90 Aite Group page 64 Digitec page 16 GFI Group page 51 Nexaweb Technologies page 97 Swissrisk page 77 Aphelion page 121 Gold-i page 128 Nordea page 5 Sybase page 65 Apple Computers Dukascopy Outside Back page 118 Cover Google page 118 Ares International page 10 Dynamic FX Consulting page 164 Grey Spark Partners page 73 O T Atrium Networks page 89 One Zero Financial Systems page 131 360T page 54 E I Option Computers page 43 Thomson Reuters page 53 B TMS Brokers eSignal page 79 Integral Development page 10 page 111 Bahrain Financial Exchange page 96 Tradency Eurobase page 119 Interbank FX page 143 P page 21 Baxter TradeSense IPC page 81 PFGBEST page 8 page 108 FX page 108 TraderTools F ISE page 98 PFSoft page 35 page 41 Bloomberg FX page 69 Transaction Network Financial Software Systems page 115 Philip Futures page 109 page 83 Bloomberg Tradebook page 105 Services First Derivatives page 67 J Portware page 6 BNP Paribas page 25 Finatek page 134 JP Morgan PrimeXM page 125 Bridgetrade page 57 page 7 U Fixnetix page 12 Progress Apama page 107 BT page 85 UBS Investment bank page 32 FlexTrade Inside Back K Cover R C Knight Capital group page 27 Forex Financial Services page 154 RBC Capital Markets page 31 Calypso Technology page 55 Fortex Inc page 101 Rous Technology page 133 Capital Markets Access L Partners page 126 FXall page 13 Leverate page 76 Caplin Systems page 117 FX Bridge page 53 S FXCM page 87 SmartTrade page 39 Companies in this issue CBI China page 163 M 2 | july 2010 e-FOREX July 2010 visit us at www.e-forex.net 72. Optimising FX Feeds: introducing FOCUS low latency rate engine services 112. Special FX - building a new breed Nicholas Pratt delves into the of trade execution platform burgeoning vendor market for software Nicholas Pratt explores how a new products and applications designed to breed of trade execution platforms help banks, brokers and traders make are being built for FX and what use of rate feeds that can blended, expectations banks and brokers have of aggregated and optimised to produce their platform providers. a more accurate, spike-free supply of prices. RETAIL E-FX PROVIDER 124. Better Bridge - better broker? 80. Financial Extranets: Providing seamless and dedicated connectivity e-Forex talks to some of the leading for FX MT4 Bridge providers to discover more about how different bridging Roger Aitken explores why FX technologies are characterised and what trading fi rms are increasingly seeking are the key trends in this relatively new, dedicated connectivity - without and specialized fi eld.