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FINTECH Cutting through the hype: Where AI is already making its presence felt in FX In highly digitised markets such as FX Not only is it globally complex - FX markets, AI algorithms can enhance does not correlate with isolated or liquidity management and execution predictable events, but is rather of large orders with minimal market impacted by random combinations of impact by optimising duration and a lot of different factors. order size in a dynamic fashion based on market conditions. Traders can also “The massive amount of fast moving deploy AI for risk management and data that is generated as a result order flow management purposes makes AI analysis (and speed) highly to streamline execution and produce suited to FX,” adds Carmody. “At the efficiencies. same time, the very liquid nature of FX markets also favours the use of AI in However, the OECD warned that order execution.” the lack of explainability of AI model processes could give rise to potential Meanwhile Alexander Culiniac, chief pro-cyclicality and systemic risk, and technology officer at SmartTrade could create possible incompatibilities Technologies also refers to the with existing financial supervision complexity of the FX market as one and internal governance frameworks of the factors that make it an ideal - possibly challenging the technology environment for the application of neutral approach to policymaking. artificial intelligence, in addition to So what makes a complex global the huge volumes of data generated market like FX - which has many and the speed with which the market different participants reliant on moves. various technologies - a good fit for AI? According to Tim Carmody, chief “AI’s ability to process vast amounts of technology officer at IPC Systems, varied data in real-time, its predictive the complexity and global nature of capabilities, and its aptitude for the FX industry is the most important high frequency trading make it empowering factor. indispensable in this environment,” he says. “Additionally, it enhances risk “Even more so than other asset management by detecting potential classes, FX is impacted by geopolitics market shifts, automates routine tasks, and regulatory and business dynamics and carries out market sentiment on a global scale,” he says. analysis through natural language ARTIFICIAL INTELLIGENCE, MACHINE LEARNING AND BIG DATA IN FINANCE © OECD 2021 Examples of AI applications in some financial market activities processing. Its adaptive learning capabilities also allow it to respond to dynamic market changes.” However, Culiniac cautions that while AI is a powerful tool, its effectiveness is dependent on the quality of the data it is trained on and it may not always accurately predict unforeseen events. EXPLOITING THE BENEFITS One of the obvious questions in any discussion of the use of AI in FX is whether the buy-side or sell-side is best placed to exploit the benefits of AI and what factors will influence utilisation of the technology. Culiniac reckons this is something of a moot point in that the distinction between buy- and sell-side is increasingly a grey area with both taking and making to some extent. “Sell-side platforms are naturally suited to exploit AI given that they can access multiple sources of information to create proprietary data sets,” he says. “Of course, there are considerations around data ownership and licences. However, the ability to access multiple sources of information and derive proprietary data sets gives these players an advantage.” “We see our sell side clients looking at AI to provide clear actionable data. Client management teams are swamped by reports and analyses these days - the issue is not that they don’t have data, it is that they have too much information.” AI and machine learning tools developed by SmartTrade enable banks to see how clients are segmented in ways no human can ascertain. Once segmented, clients can be targeted in terms of upselling and marketing to make sure the bank’s client interactions are relevant and offer value. Further practical examples of AI/machine learning logic include looking at how client behaviour patterns change in terms of how and 66 JULY 20<strong>23</strong> e-FOREX
YOUR PIONEERING PARTNER IN INSTITUTIONAL FX & CFDs WE EMPOWER YOUR BUSINESS WITH: End-to-End Wholesale Execution Multi-Asset Liquidity Solutions Extensive Market Access and Connectivity Market Data Powered by Decades of Real Transactions Schedule a meeting with FXCM Pro team WWW.FXCM.COM/PRO The information provided is intended for institutional and professional clients only. Trading on margin carries a risk that losses may exceed your deposited funds. The products may not be suitable for all investors. Please ensure that you fully understand the risks involved. The FXCM Group is headquartered at 20 Gresham Street, 4th Floor, London EC2V 7JE, United Kingdom. JULY 20<strong>23</strong> e-FOREX 67
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transforming global foreign exchang
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Welcome to e-FOREX transforming glo
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Order Management System Supercharge
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Institutional EMBARK POWERFUL LIQUI
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Evolving with the Market Added Func
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We build the community. You join th
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Page 21 and 22: TRADE SMARTER, FASTER AND SAFER Ref
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Page 25 and 26: THE BENCHMARK SERVICE YOUR PORTFOLI
Page 27 and 28: GFMA calls for greater use of DYNAM
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Page 43 and 44: Next level financial markets A new
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Page 47 and 48: THE e-FOREX INTERVIEW Michael Idzko
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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
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