Thought leadership on the automation of the FX brokerage. Round table discussion in Cyprus
During the iFXEXPO in Limassol, Cyprus last week, one of the most discussed topics with regard to the operations of a retail FX brokerage in today’s cost-conscious environment was automation. As well as a dedicated panel hosted on Day 2, the hot topic featured in many panels throughout the event, with the key functions of […]
During the iFXEXPO in Limassol, Cyprus last week, one of the most discussed topics with regard to the operations of a retail FX brokerage in today’s cost-conscious environment was automation.
As well as a dedicated panel hosted on Day 2, the hot topic featured in many panels throughout the event, with the key functions of marketing, customer relationship management and risk management being the focus of much of the debate.
On Friday, May 27, after the largest FX industry conference in the world had drawn to a close and the sunny Eastern Mediterranean skies had given way to a dark and fierce storm, FinanceFeeds met with several industry executives who reflected on the week that had passed, and were keen to share their observations.
Welcome to the machine….. learning!
Andrew Lane, CEO of news sentiment-based technology company Acuity Trading, met with FinanceFeeds at the prestigious Londa Hotel in Limassol, where he reflected on the hot topic. “We had three areas to talk about with regards to automation during the conference. These were marketing – how automation could be used to help manage clients across the client journey, risk management, provided by automated retention firms like cPattern, and research.”
Mr. Lane continued by describing how “A lot of the comments from a number of panellists focussed on the automation within call centers which is by no means the only application for automation in this sector. Automation can and should be a much wider consideration for a broker if they are to prosper in today’s highly competitive environment. From reading the news, which is obviously where Acuity Trading is specialising, to advertising, automation has far reaching benefits for brokers.
“At Acuity Trading, we have focussed heavily on the latter so that brokers not only gain from investment in new tools but help to increase their ROI from existing products, ones that their clients are familiar with but don’t utilise as much as they could do” said Mr. Lane.
When reflecting on that particular panel, Mr. Lane said: “I felt there was solid support for the role that automation can play in a broker’s operation but the general consensus was that the entire process shouldn’t be all automated, and there should remain some human resource element. However, one of the most successful brokers to date has been one where digitalisation has replaced a physical sales team and I believe that automation will have even greater application in the future for brokers.”
Plus500, which rose from relatively humble beginnings as a small retail FX brokerage to a publicly listed company with a market capitalization of $1 billion by spring 2015, is still being used as a reference point for successful automation mastering the art of operating with no sales team, and a very well honed digital marketing system.
Nicc Lewis, VP Marketing at Leverate explained to FinanceFeeds “Automation and Machine Learning are topics that the Fintech industry find difficult. On the one side the rising competition and marketing costs point to a need to be super efficient, on the other hand the concepts are foreign and difficult for Brokers to swallow.”
“Most brokers actually automate today – they just do not realize it. They manage their exposure and risk via automated systems. Some of these systems also use machine learning as a key component. The rest of the online world has already gone much further seeing that the ability to compute large amounts of personalized data, learn and react can only be achieved by use of automation and machine learning” – Nicc Lewis, VP Marketing, Leverate
“One example I give from the wider world is RTB – Real Time Bidding for display advertising where there is a fraction of a second to compute the value if any on a piece of real estate for advertising. The best systems learn fast and optimize continually” continued Mr. Lewis.
“So automation and machine learning for trader interaction by brokers should be a relatively simple affair by comparison and it will happen very fast. If I were to predict how and when, then I think that Social Trading will be one area that moves a little faster. The DNA of Social Trading is to offer the right masters and instruments at the right time. This will be the pioneer for full machine capabilities” said Mr. Lewis.
In conclusion, Mr. Lewis said “The other side is that is coming closer is conversion automation. Although there are some very smart retention systems, the quick wins and case study from conversion and Social Trading will give brokers the confidence to dive deeper into adopting and learning how to become more and more complex in their use of processing power.”
Data extraction – The seasoned firms delve deep into Big Data
Nikki Carpenter, Director at Acuity Trading who listened to the marketing panel recounted: “The successful brokers of the future will be the ones who will expedite automation in their marketing but what will set the leaders apart from the rest will be how they personalize their efforts and product offerings toward specific customer demographics, styles and requirements.”
“Big data presents an opportunity for brokers to personalise in a much more granular way but this has yet to be fully exploited,” continued Nikki. “The panellists’ main criticism of the industry at the moment is that clients are thought of as groups and not individuals. And whilst automation could potentially compound this, with correct application, the value brokers could derive from their data with the help of automation is vast.”
“With so much valuable data, I envisage some brokerages becoming Big Data companies with a FX retail brokerage attached onto it”- Andrew Lane, CEO, Acuity Trading
Tradency offers an example of how to take hold of big data. Lior[Its hard to understand how Mirror Trader flows within the article here?] Nabat, CEO of Tradency, inventor of the Mirror Trader concept over 11 years ago was at this year’s iFXEXPO, where he gave FinanceFeeds a comprehensive insight into the new RoboX system which is now live and available globally, its first customer being FXDD which adopted the system earlier this month.
“Everyone deals with their challenges in a different way” said Mr. Nabat. All the big data that we have collected can be used to disrupt and innovate, and therefore we figured that we could use and adjust the data that we have collected for the advantage of development of the system.”
“We took the data, and it was very interesting what came out of the studies that we made” – Lior Nabat, CEO, Tradency.
“The new RoboX system differs from anything that has gone before” enthused Mr. Nabat. “Think of its main structure as being a kind of package warehouse which holds a series of rules. Traders can put them in a group, and then can switch between them all the time. The packages consist of a superset of the best strategies that follow pre-define rules. Then, in pre-defined periodic schedules, the package updates the content within it automatically to contain only the most qualify strategies available.”
“This way, clients can receive the best strategies all the time, according to market conditions and their requirements. There is absolutely no need to learn, and no need to think about trading at all. This has been made possible by combining the data, strategies and signals and extracting the best details” he said.
We then picked up the phone to Lubomir Kaneti, COO of FXDD for further detail as to why such automation is important to him. “While managed and signal-based or social trading are not new and have their role in the market serving particular segments of investors, here we have an innovative idea where the signal based trading is blended with AI that is intended to deliver a personalized solution matching the goals and risk tolerance of the particular client” said Mr. Kaneti.
“Of course volumes can be written about how good the algorithm is and how much better the personalized solution is compared to other options, but I think the team at Tradency has a lot of experience in this area and they are committed to providing a world class product” – Lubomir Kaneti, COO, FXDD
Mr. Lane concurred with Mr. Nabat’s theory by explaining “Many seasoned technology providers are now looking into the use of big data when approaching automation.”
“This week, we have discussed data extraction. Many brokers have reams of data but they don’t harvest that data. From onboarding a client through the web, all the way through to trading and leaving, brokers potentially create massive amounts of data that could be re-employed” he explained.
“During the panel, some felt that companies need people to take charge of data in a brokerage, the other panelists also said that small initial steps could be taken in automating, which didn’t need experts” said Mr. Lane.
“I went further and said that automation is not really expensive now, the likes of Amazon, Microsoft and Google, all offer systems that can analyse data at very small cost with little specialist skills required” – Andrew Lane, CEO, Acuity Trading
“One of the things that I firmly believe in is a matter that cPattern and Acuity Trading both encompass, that being the application of machine learning” said Mr. Lane.
He continued “What stood out to me is that machine learning automation is nothing new but the value that companies like cPattern or Acuity Trading can provide is the application of artificial intelligence (AI).”
“15 years ago when I started at Dow Jones and the Wall Street Journal, people traded from one news feed alone. Nowadays, if they only trade with those legacy institutions, they are potentially missing out on the other 50,000 news sources out there today. But with this problem comes an opportunity in itself as Traders, like so many of us today, are suffering with information obesity. Traders need to find a way to take advantage of all this news, without getting lost in the noise which is where news analytics comes in.” – Andrew Lane, CEO, Acuity Trading.
Infobesity is here!
Information obesity, or infobesity, is the proliferation of critical information from multiple sources across multiple languages, that must be gathered and made sense of very quickly for it to be useful. Effectively, this is a bloating of data that now exists.
With regard to the service provided by cPattern, the product is driven by machine learning but the value that it brings to brokers is that it helps them to drive retention.
“The point is, it is the application of automation that is winning the race” said Mr. Lane.
“Another more familiar and simple example of machine learning application is to understand which liquidity provider is more likely to fill your order. There are many factors that affect an LP filling an order, such as time and news. If LP1 were offering best price pre non-farm payroll, for example, it may not be offering to fill the entire order, so you seek an alternative LP producing a time lag. What if your engine could learn which LP was more likely to fill your order by analysing historical news and time data in real time? ” – Andrew Lane, CEO, Acuity Trading.
Mr. Lane expanded on this “People for example, who log on from Ecuador, or Mexico, late at night may have proven more profitable than those logging on between 6.00 and 7.00. This is data which could be fed back to the acquisition model.”
“One of my things about research is what the future holds. During yesterday’s discussion panel at iFXEXPO I talked about the world of Kensho. This is one of the biggest fintech startups over the last few years and has been backed by major banks” said Mr. Lane.
“To give an example of what Kensho does, a hedge fund manager says that he is looking for correlations between raw Kenyan commodities, and, for example, Australian minerals, and wants to study this.”
“The quant who works there will research the data and come back to the fund manager perhaps a week later. With Kensho, the Fund Manager asks Kensho and gets feed back instantly ” said Mr. Lane.
“During the panel, I was saying that this is the future of MetaTrader 4. No longer will price be the only data set available. Instead, brokers and traders will feed reams of data into the back end of MetaTrader and then traders and brokers alike will ask the terminal questions. A broker will ask about retention, and a trader will ask about strategies and the platform will give you the answer” – Andrew Lane, CEO, Acuity Trading.
Indeed, the use of big data is now coming of age. Retail FX trading is just about established enough for there to be a considerable series of data available that now dates back at least a decade.
If this is harnessed and used intelligently, it may well form a new era.