ITUNES FOR FX (courtesy of the TABB Group)
August 26, 2013 Leave a comment
iTunes for FX
At the top of foreign exchange traders’ wish list is a trading system with a clean, intuitive interface that can simplify and streamline their workflow and help them execute their strategies.
I’ve been talking to lots of FX traders recently, asking what was top on their wish lists for FX. Most of the answers fell into one of a few categories: “Better liquidity, particularly on broken date rolls”; “easier connectivity”; “real straight-through processing”; and the like. But the one that really made me think was: “iTunes for FX.”
“Why iTunes?” I asked.
The trader’s answer was logical and far-reaching: “If there were an FX trading system that worked half as well as iTunes, it would rule the world,” he answered.
“Just think about the iTunes process,” he continued. “You can take any CD you have, rip it into iTunes and, once it’s digital, you can manage it much more efficiently. Second, I can access just about any music I want at a reasonable price through the iTunes store. Do you have any idea how hard it is to integrate into any one of the OMSs, EMSs or ECNs? It takes weeks or months, and most are clunky.”
He added, “But what I really like about iTunes is the ability to make playlists. All I have to do is spend a little set up time—very little, actually—and I can store music for whatever purpose I want—workouts, parties, etc.”
“And how does that relate to FX?” I asked.
“Don’t you see? Eighty-five percent of what I do in FX is pretty routine, and I have standard strategies. If I’m looking to hedge a new trade, I’ll always look to hedge to the same roll date that month with all my other trades in that currency. I can net more efficiently and it’s easier to keep track that way. If I receive an order from the equities desk for a large spot trade and it’s before 11am, I’ll just give it to a dealer to execute flat vs. the WM mid. And so on. I wish I could just hit a playlist for ‘do all my rolls,’ spread it around my top five to eight dealers, and have everything taken care of according to rules I set up.”
“How hard is it for you to do now?”
“Well, it’s a major pain in FX. No one has an adequate rules engine that can integrate all my internal communications. If I want things a certain way, now I have to beg my OMS or EMS provider to make a change, or I have to program macros myself and patch stuff together. In iTunes it is easy to make a playlist. In fact, there’s even a ‘Genius’ mode in which the software can make playlists for you based on what’s in your library and what others have done.”
“But you just said that playlists—or rather, pre-formatted work routines—would be good for 80% of what you do. What about the other 20%?” I asked.
“I don’t have to reduce everything to simple rules, but I’d be thrilled if I could spend my effort on just the difficult stuff. In iTunes, if I want to deviate from the playlist and go manual, I still can access anything in my library, on any device. It is all available on my desktop, my laptop, my phone and my iPad, anywhere I am, because it’s all synched in the cloud. I can switch from playlists to any other mode in one click. In FX, I once counted and it took me 17 mouse clicks just to get a single trade done – and I am generally doing 50 to100 trades a day. Just give me iTunes in FX.”
“OK, I get it. But that still implies you know just what to go for in your library at any time. How do you learn anything new according to your analogy?”
“Well, you don’t really. But you can do all the old stuff better.”
“So what you’re saying is, what you really need is iTunes with Pandora.”
That threw the trader for a loop. “I don’t know Pandora; what’s that?” he asked me.
“Pandora is essentially where you teach the machine what you like. You start it with a theme—say, music by an artist. Then, based on that information, it picks similar music based on an analysis of what others like. So if you pick a blues artist, like B.B. King, it will play you a B.B. King song and then another similar blues tune by someone else, which you either give a thumbs up or a thumbs down. Based on that feedback, it gives you another song, which you grade, then another and another. After a while it improves from a 65% hit ratio up into the 90+% range, constantly expanding your repertoire with new artists you didn’t know before. And if a song comes up that you don’t like, you give it the thumbs down, and Pandora immediately cuts out that song and replaces it, and the process starts again,” I explained.
“Now that would be cool,” he responded. “Give me iTunes for FX plus Pandora!”
And that’s what we’re creating now at BuysideFX. Like an Apple product: beautiful design, deep but intuitive feature sets, with feedback loops that make it better and better with every trade. Stay tuned … and if you have features you’ve identified to make FX trading simpler and better, give us a call and let’s discuss it.
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