Market Alpha at TradeTech FX USA 2022: Explaining liquidity and market data

Rick Steves

Finance Feeds was at TradeTech FX USA 2022, which took place at the Eden Roc Resort in Miami.

The conference brought together leading buy-side heads of FX and portfolio management in the return to face-to-face events since the pandemic began.

Contrary to what would be expected out of a pandemic-ridden world economy, the FX industry didn’t slow down. Quite the opposite, in fact, and participants gathered in Miami to learn and discuss the news, innovation, and other pressing matters in the sector.

FinanceFeeds Editor-in-Chief Nikolai Isayev had the chance to set up an interview with Michael Koegler, Managing Principal and Co-Founder at Market Alpha Advisors, a market structure and fintech advisory firm that specializes in a wide range of asset classes.

“We are a group of former Wall Street executives that have been in the business between 25 and 30 years, with expertise in a number of asset classes, including rates, credit, equities, digital assets, FX, etc”, he said as he praised the conference “At the TradeTech FX confrence, you get to see all the latest and greatest technologies that firms are offer in the FX markets, which is one of the most evolved asset classes in the financial markets”.

FX evolution and the pandemic blow

Michael Koegler was one of the leading figures at TradeTechFX USA 2022. He gave the Chairperson’s opening remarks on Innovation Day, was a speaker on the panel about the electronification of futures, forwards, NDFs & options, and moderated three other panels: on ESG, data and industry initiatives.

He told Finance Feeds that the FX industry has changed a lot since the 90s. “There’s been a tremendous divergence between market structure in FX and many of the other financial market asset classes. In FX, there has been an explosion of technology, data, analytics and execution choice”, adding that this evolution hasn’t arrived to many of the other OTC asset classes to the same degree as FX.

Since the FX industry has been systematically ahead of the curve technology-wise, this conference is of great value as it also paves the way for Treasuries, derivatives, and so on.

TradetechFX USA 2022 is the first face-to-face event for WBR in the U.S. since the onset of the pandemic, which has had a dramatic effect on dealing rooms across the globe, he said.

The institutional trading environment is very much based on physical proximity and the exchange of information between professionals. Something that can’t be reproduced remotely. Going remote was a huge challenge for trading firms. Trading operations had to adapt dramatically.

“It was certainly not smooth for everyone”, he said, “as sharing information in real time became very difficult. The transition to the virtual environment was relatively seamless for Market Alpha, as we are na advisory firm and do not have trading operations to manage”.

Why different liquidity between FX spot and Futures, NDFs?

Michael Koegler then briefed Nikolai about the content of the discussions he would be participating in, namely the electronification of futures, forwards, NDFs and options.

“That panel will focus on the different types of products available in the FX market. It’s going to get into the reasons why certain products have deeper liquidity than others. For example, greater standardization in a particular asset class typically leads to greater liquidity. We’re also going to discuss the different market Dynamics that exist for the various products in the FX market, such as FX spot, NDFs, futures, swaps and forwards”.

“FX spot is highly commoditized and incredibly liquid. Virtually all participants can trade with each other participant, which leads to greater liquidity”, Koegler said as he compared it with forwards and swaps, which are often highly customized as “participants often hedge to a specific date. There is also a credit component to swaps and forwards so all participants cannot necessarily face each other. They may not have credit lines established to a potential counterparty, which detracts from the total number of participants that they can face on a trade.”

Michael also moderated a panel on market data. How can retail and institutional brokers find the alpha in data analysis?, Nikolai asked.

“Data and analytics are more important today than they were 10 or 20 years ago because automated execution requires high-quality data and analytics”, Koegler explained.

“If you’re automating your trading operations, then data and analytics are incredibly important”, Koegler added as he pointed to the need to bring tick data, trade data, bid-offer spread data, and macroeconomic data into a firm’s execution workflow.

“That is crucial in terms of generating alpha and minimizing information leakage. Transforming raw data in a way that can be digested by the execution workflow of a buy-side firm is crucial to the process, whether the execution is via algorithm or a human being.”

Read this next

blockdag

Top Bullish Crypto: Fetch.ai & Pepe Coin Price Surge, But BlockDAG Sees Investor Rush as X Series Miners Stand Out

Compare Fetch.ai (FET) Bull Run, Pepe Coin price, and top bullish crypto BlockDAG. Discover why BlockDAG’s innovation and growth potential make it the best choice.

Digital Assets

Coinbase resumes XRP trading in New York after nine-month hiatus

Coinbase has resumed trading for XRP in New York, the company’s chief legal officer, Paul Grewal, announced on Thursday. This comes after a nine-month suspension of the cryptocurrency on the exchange due to regulatory scrutiny.

Institutional FX

Swissquote joins Fortex Hub to expand liquidity distribution

ECN trading platform and technology provider, Fortex Inc. has announced a new integration with Swissquote Group, Switzerland’s provider of online trading services.

Chainwire

Multipool Enters Partnership with Mobilum Offering Users Fiat to DeFi On/Off Ramp

Multipool, a leading innovator in the blockchain and cryptocurrency industry announces a corporate partnership with Mobilum.

Retail FX

IC Markets taps TipRanks’ trading research tools

Sydney-based IC Markets has completed integration of TipRanks’s rating tools, which ranks analysts and financial bloggers based on their picks’ performance analysis, in a bid to provide its clients with new research capabilities.

Digital Assets

Gate.io shelves plan to operate in Hong Kong

Gate Digital Ltd (Gate HK) announced it is winding down operations and has withdrawn its application for a crypto trading platform license in Hong Kong.

Chainwire

Sui and Mesh Combine Forces to Bring Simplified Transactions Across the Sui Ecosystem

With the addition of the Mesh platform, Sui Wallet will achieve product parity with the world’s largest self-custody wallets, while Mesh now natively supports the SUI token

Market News, Tech and Fundamental, Technical Analysis

EURGBP Technical Analysis Report 23 May, 2024

EURGBP currency pair can be expected to rise further toward the next resistance level 0.8560.

Digital Assets

Bybit denies financial woes and hacking rumors

Ben Zhou, CEO of Dubai-based cryptocurrency exchange Bybit, has refuted circulating rumors that the platform has been hacked or is insolvent. Zhou addressed the speculations in a post on the social media platform X.

<