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substantial amount of money to be made in the FX
market and that is what is fundamentally driving the
demand for these services at the end of the day.”
“Increasingly market players are interested in FX since
it is market place where there is uncaptured alpha,
depending on the currency pair and what type of
strategy traders are looking at. As such, it continues to
present a lot of untapped opportunities,” notes New
York-based Doe.
From an historical data perspective, traders came to
Thomson Reuters for data to initiate back testing, as
the firm has had a fairly dominant position in the FX
market. He adds: “Tick data is absolutely essential for
back testing and going live [with an algorithmic
strategy], simply because of the high frequency nature
of FX trading.”
Kohler says in relation to recent ICAP enhancements
to the quality and breadth of data being offered:
“We’re undertaking this on an ongoing basis and
continually investing in the area. Compared to the
historical data that we were releasing just a few years
ago, today it’s much deeper and richer. This is
specifically because we’re able to store and tag
[instruments identifiers] to a far more granular level.”
ICAP also lay claim to offering probably the “most
granular” real-time data output through their ‘Live’
feed. A year ago, ‘Live’ was providing four updates per
second, but since before summer 2009, the frequency
Emmanuel Doe
“Tick data is absolutely essential for back testing and
going live [with an algorithmic strategy], simply because
of the high frequency nature of FX trading”
68 | january 2010 e-FOREX
>>>
was increased to 10 updates per second. (The move
reflects developments in the market data feeds for the
EBS FX platform).
Usage
Historical tick data is used primarily for program
and/or automated trading, portfolio management and
valuations. It also plays a vital role in supporting the
compliance, accounting and audit functions of
financial institutions.
Philip Brittan, global business manager for FX at
Bloomberg, confirms that the need for algorithmic FX
trading strategies, FX Quant research, regulatory
compliance/ trade validation requirements are all “valid
reasons” driving more usage of historical FX data.
“High-frequency algorithmic trading is the only driver
that truly requires tick-by-tick data, so that
undoubtedly accounts for the largest volume of FX
data being consumed these days,” he says.
Jim Foster, Global Head of Product Strategy, FXall says
in addition to algo traders wanting historical tick data
to build and back-test models, it can also be required
for benchmarking purposes.“Occasionally highfrequency
algo traders want our historical market data
to benchmark the system speed to monitor how fast we
receive and distribute movements in the market in
comparison to other data they are monitoring,” he says.
Furthermore, institutional investors can need the ability
to benchmark pricing for control and compliance
purposes. Foster indicates that more and more clients
are asking for “sophisticated reporting” to understand
exactly where the market was at the time of execution
to ensure they were benchmarked properly.
For institutional asset managers who have a need to
analyse execution quality, FXall timestamps trades to the
millisecond when they receive the requirement - at the
time it is placed into the market - on each quote
provided by the selected banks.
“On execution,” he explains. “We allow a firm to
analyse the execution rate versus both external
benchmarks, and FXall prices. And, the availability of
historical data includes similarly rigorous timestamps on
each quote.”
Sourcing and storage issues
In terms of the issues that FX trading firms need to
consider with regard to sourcing and storing of
historical FX data, ICAP’s Kohler notes that in terms
of infrastructure, hardware and architecture, many