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FX Liquidity Management: Addressing the challenges of a seriously complex undertaking DATA ANALYTICAL TOOLS ARE ALREADY THE ONLY WAY TO TACKLE MOST OF THE KEY CHALLENGES FACING FX LIQUIDITY MANAGERS TRADING OPERATIONS a completely different process depending on the type of organisation, and who is having the conversations with LPs.” What is increasingly clear across the FX market, is the impact that liquidity can have on a firm, says Hopkins. “Liquidity management has become both more complex and more important. For example, there are new ways of trading (some firms have replaced sweeping with full amount execution styles) and a liquidity manager has to be able to assess the impact of that change. Sales teams at liquidity providers (both banks and non-banks) also now spend far more time talking about liquidity and execution than they used to, as opposed to the traditional model of solely discussing directional market moves and macroeconomics. This is reflected in the significant appetite on the buy-side for this type of information, the importance of which in many cases outweighs that of more traditional types of content supplied by the sell-side.” All of these questions are unanswerable without technology; it is no longer sufficient just to be eyeballing spreads on a GUI or relying on a quarterly market share report. Liquidity management technology is an ongoing exercise, and hugely important as the counterbalance to the growing complexity of liquidity, says Hopkins. In terms of AI, a lot of the problems with liquidity management are multidimensional so are very suited to machine learning (ML), says Hopkins. “There are many areas where ML can have a lot of value. However model explainability is key - the ultimate objective is to understand liquidity and to increase transparency. If you come to rely on complex ML models that are effectively black boxes as the basis for your liquidity management approach, the danger is that you are just moving the complexity from the trading process to the measurement process.” That said, there are only so many ways that FX can be traded. Algos introduced a new way of trading but also brought more visibility into the market. And the changes to last look are good examples of how the technology has evolved. Another example of the evolution of liquidity management is the greater use of liquidity audits and using data analysis to better understand how to use and rotate a panel of liquidity providers. When it comes to the next generation of liquidity management solutions, Hopkins identifies three phases of the process – measurement (what does my liquidity look like?); simulation (what would happen to my liquidity under certain conditions?); and optimisation (what is the best outcome?) “The much longer-term objective will likely be to take the results of those simulations and feed them into execution systems and then automate that process and create a closed-loop circuit,” says Hopkins. “The sell-side is already making those adjustments in how they manage the liquidity they distribute to their clients, and it is inevitable that this will start to happen on the buy-side. At some stage, the solutions also have to go beyond explicit transaction cost measurement to include factors like the cost of capital or the cost of clearing so that you have a more complete picture of liquidity and the associated costs.” 26 JULY 20<strong>23</strong> e-FOREX
GFMA calls for greater use of DYNAMIC CREDIT Solve the evolving credit needs of the market with CobaltFX Learn more *GFMA= Global Financial Markets Association. JULY 20<strong>23</strong> e-FOREX 27
Page 1 and 2: transforming global foreign exchang
Page 3 and 4: Welcome to e-FOREX transforming glo
Page 5 and 6: Order Management System Supercharge
Page 7 and 8: Institutional EMBARK POWERFUL LIQUI
Page 9 and 10: Evolving with the Market Added Func
Page 11 and 12: JULY 2023 e-FOREX 11
Page 13 and 14: We build the community. You join th
Page 15 and 16: MARKET COMMENTARY is an industry ch
Page 17 and 18: TRADING OPERATIONS Nicholas Pratt e
Page 21 and 22: TRADE SMARTER, FASTER AND SAFER Ref
Page 23 and 24: Welcome to the next generation of b
Page 25: THE BENCHMARK SERVICE YOUR PORTFOLI
Page 29 and 30: REGIONAL E-FX PERSPECTIVE JULY 2023
Page 31 and 32: Your gateway to the global FX ecosy
Page 35 and 36: REGIONAL E-FX PERSPECTIVE and deep
Page 37 and 38: to building trusted partnerships Fl
Page 39 and 40: The Global Standard FX Swaps and Fo
Page 41 and 42: REGIONAL E-FX PERSPECTIVE notes.
Page 43 and 44: Next level financial markets A new
Page 45 and 46: PROVIDER PROFILE Our clients in Asi
Page 47 and 48: THE e-FOREX INTERVIEW Michael Idzko
Page 49 and 50: THE e-FOREX INTERVIEW of the issues
Page 51 and 52: THE e-FOREX INTERVIEW Coming back w
Page 53 and 54: THE e-FOREX INTERVIEW WE NEED PEOPL
Page 55 and 56: SPECIAL REPORT JULY 2023 e-FOREX 55
Page 57 and 58: We set the standard in FX. The proo
Page 59 and 60: FX trading and liquidity solutions
Page 61 and 62: Powering your technology infrastruc
Page 63 and 64: FINTECH distinct examples of capabi
Page 65 and 66: FINTECH Cutting through the hype: W
Page 67 and 68: YOUR PIONEERING PARTNER IN INSTITUT
Page 69 and 70: 2023 PRINCIPAL SPONSORS JULY 2023 e

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