How infrastructure and analytics are shaping the future of e-FX trading

Sector challenges

In the old days many regional banks took their own price making risks. Today, even though the sources of reference pricing have become more concentrated, the volume of price updates, usually consumed as streams, has increased significantly.

Along with liquidity concentration, banks face increasing competition to ensure the high quality and profitability of their own client pricing, of which the foundational measure is performance. If a bank’s pricing system cannot keep up with the volume of prices it is transacting, this will detrimentally impact all other measures.

Whilst the largest global banks and non-banks may be able to develop and maintain their own pricing engines, most regional, local and specialist banks rely in some part on third-party software to power their electronic trading. Although cheaper in terms of employees, the lifespan of these systems is decreasing. Instead of swapping out their trading system every 7-10 years, most platforms now undergo significant updates within a 3–4-year cycle. Regardless of whether a bank’s technology platform is developed in-house or out-sourced, performance measurement is a key requirement to ensure the system is fit for purpose in all market conditions.

Where problems arise, how do firms determine what has gone wrong? How can issues such as bottleneck locations and surges in network latency be pin-pointed and resolved? And how do firms draw correct conclusions about how their technology is contributing to or detracting from their performance – thus running the risk of inappropriate and unnecessary system overhauls?

The solution

Technology has e-FX trading in a triple bind, where the need for speed, cost efficiency and client relationships compete for priority. Making the wrong decisions about your e-FX platform will undermine all of these. But where can a time-starved e-FX manager find the data to support their decision making? The answer lies in the sometimes-overlooked infrastructure their trading systems operate on.

Modern computer networks operate through a series of interconnected devices (routers, switches, and endpoints) which communicate by breaking data into packets. Technologies like optical taps or port mirroring can reflect these packets to another system without any latency impact on the live traffic.

Mirroring technology ensures you have a record of the inputs and outputs from your trading system, and it allows you to monitor your client and liquidity provider connections as close to the destination as possible: typically, you can monitor the specific port where the cross-connect terminates. So, when you measure the performance of your trading system you are including your network, operating system and network cards – all of which can have a significant impact on your profitability.

The knowledge

Working with a knowledgeable and experienced service provider who understands Capital Markets and e-FX trading environments ensures you have both the monitoring and the underlying high performing infrastructure in place. Since 2011 Capital Markets Infrastructure as a Service specialist Beeks Group has honed the technology to support and monitor market data and trading performance metrics. Beeks CEO Gordon McArthur says: “We’ve spent over a decade listening to nobody else but traders and financial companies, so we know their concerns, challenges and ambitions.

With this expertise, we take care of the heavy lifting, delivery, build, and maintenance,—so financial firms can stay focused on driving their business forward.

For example, our analytics tools and services can be plugged into any new or existing e-FX trading environment and help boost liquidity and profit by making your whole end-to-end pricing workflow visible – including the underlying infrastructure and your delivery networks.”

Beeks Analytics

Beeks Analytics offers advanced tools for capturing, decoding, and streaming data, empowering financial institutions with real-time insights. Not only can it monitor Beeks-hosted trading systems, it can also be deployed in clients’ own environments to provide equivalent monitoring wherever the trading system is hosted.

Competitive edge is achieved with the following Analytics capabilities:

Data packet distributor capture
This involves recording high-frequency data as it travels over a network, and adding high precision nanosecond timestamping for each packet received.  e-FX managers can gather crucial real-time information on latency and traffic volumes from this data without adding any extra processing burden to the trading system.

Financial data decoding
Once the data packets are captured, the next step is translating the binary data and extracting meaningful information into an easy to analyse format. This breaks the packet data into specific fields for performing calculations. For example, you may choose only to analyse trading requests and ignore the performance of session traffic or historic trade requests, or you may choose to monitor performance of specific currency pairs. Decoding also means reporting performance in business terms. So you can combine and compare real network data with hit ratio and pricing information per client, against nanosecond-accurate volume and latency information about your pricing from liquidity providers.

Data streaming analytics
All this information can be displayed within the Beeks Analytics tool itself. However, some clients may wish to combine the decoded messages or network information with other data. Beeks Analytics facilitates this by streaming the output of the messages, which clients can process in big data systems or tick repositories for further quantitative analysis.

A new standard for e-FX performance

“Beeks Analytics allows an e-FX manager to continually hold providers accountable for their performance promises,” asserts McArthur. “With Beeks Analytics, financial firms can see under the hood of their trading systems, ensuring every piece of the system (and all their liquidity providers) are operating at peak efficiency. So you’re no longer reacting to unexpected performance issues – you’re proactively steering your systems towards profitability. In today’s market, that level of insight isn’t just an advantage; it’s a necessity.”