What is being done to develop more end-to-end trading workflows?
The widespread adoption and distribution of standardised APIs have massively expanded the industry’s ability to create easily integrated workflows. Now data can easily flow throughout the trading process in a simple and more automated process.
As for what’s on the horizon, we will certainly see additional options products. smartTrade has already implemented vanilla calls and puts, along with straddle, strangle and risk reversal and spreads. Based on client demand we plan to add support for more exotic option types and integrate additional distribution venues.
In what ways is FX options liquidity optimisation helping to improve the functionality of electronic platforms?
Liquidity optimisation is the ability for someone to access the best liquidity available at a fair price, in sufficient quality for their needs and in a timely manner. Before the widespread availability and deployment of liquidity optimisation, customers were dependent on the ability of liquidity providers to distribute prices on demand; something that could be time-consuming and only done so often without moving the market.
Liquidity providers need to set prices where they know they can make a margin, which leads to greater concentration in traditional products where there is less chance of mispricing. The overall effect for both sides is more sustainable relationships and better risk management.
Why is smartTrade uniquely placed to cater for the needs of multi-asset class traders who are also looking for FX option trading solutions?
smartTrade’s roots have always been in the liquidity management business. Since its inception 20 years ago, the company’s mission has been to provide technical access to extensive liquidity sources and distribution venues for clients.
That mission has never been confined to a single asset class. smartTrade as an organisation is consciously committed to a multi-asset design policy that enables the support of cross asset functionality at a deep, scalable, and reliable level. The trading infrastructure for all asset classes are hosted in the same data centres, using the same underlying low latency, fully redundant infrastructure.
Options were the logical next step on that journey. smartTrade works with customers who trade FX and Fixed Income every day. Market and macro forces, as we highlighted above, are pushing them to increasingly consider and implement options strategies. smartTrade offers customers the ability to trade options with their trusted providers, using the same level of care and expertise clients have experienced for years.
As FX options flows increasingly migrate to execution channels, what’s next for automation?
For smartTrade, post trade and option hedging strategies are the next frontier. We want to develop automated rule-based options for transaction execution. Do you want to exercise the option or not? Do you need physical delivery? What is currently being done inside post-trading systems at banks could be absorbed into an end-to-end system. On the hedging side we see clients and banks automatically linking delta hedging workflows. We also could see distribution automation of more complex option types such as the next generation exotics. The market’s not quite there yet, but this is definitely the direction of travel.
As we look to the future, what additional features might become more widely available?
Features right now exclusive to the very upper end of the market will filter and diffuse throughout the wider market becoming more widely available to all users.
Exotic options with unique payment structures, expiration dates, and strike prices, along with multi-leg options, should spread, along with axe displays that make it easier to show interest. We also expect wizards that can automatically construct options structures to achieve specific risk management or profit outcomes, along with actionable volatility spreads and algo options to become more prevalent in the future as the market matures.
The scope for innovation and development in this market is endless and we are excited to be leading the industry in this direction.