The ongoing electronification of FX in Asia

Martin Haines, managing director, Asia, at KX explains how KX Insights – a cloud-first, real-time analytics platform – can add scale and efficiency to real-time analytics programmes for customers in Asia to adapt to different trading environments and combat volatility

The global FX trading landscape has undergone continuous evolution in the past two decades, with demand for better visibility into trade execution, pursuit of better-quality liquidity, and changes in the regulatory environment driving adoption of new technologies. The promise of greater operational and cost efficiencies through streamlined processes, end-to-end integrated workflows and consolidation of price and risk management through trading platforms has drawn many organisations along the path of electronification. 

The Covid-19 pandemic has brought to light the role that robust and scalable technology solutions play in reducing negative business impact and ensuring continuity with trading floors that were turned into remote operations overnight. There is arguably no clearer example of the importance of technology in the sector than how the global financial services sector adapted to the huge changes forced upon it. The experience has further urged organisations to transform digitally and revamp their businesses through data-powered innovations. 

This ‘new normal’ of increased automation, greater access to data and continued electronification of platforms and systems is enabling better decision-making and the creation of higher-value services across the sector as organisations find they have the data, insights and time to innovate.

Asia, characterised by highly fragmented markets – each with its own idiosyncrasies – has traditionally played catch up to its western counterparts in the electronic FX trading arena. Nonetheless, the pace of digitalisation has certainly picked up in recent years, as we see corporate treasuries and buy-side firms in Asia actively looking to streamline trading operations through automation and fully integrated workflow solutions to pursue operational efficiency. 

The move to e-trading has helped simplify the trade execution process and enabled market participants to not only better assess the competitiveness and consistency of liquidity during volatile markets, but also free up valuable resources to focus on differentiating their services to drive profitability. This naturally leads to a virtuous cycle of further electronification of trading and automation across more products. 

As such, banks in Asia are also under pressure to keep up with client-driven requirements and the associated technological advancements to secure their foothold in the e‑FX space in the face of global competition. Inevitably, clients seek consistent and quality liquidity during volatile times, and robust technology is key for banks to deliver that. This is especially so as transparency improves with both the buy-side and sell-side leveraging technology and the power of data to uncover insights into the quality of liquidity, cost of rejects and market impact, and adapt their trade execution process to generate positive outcomes.  

Over the past year, we have been appointed by two major banks in the region to help revamp their FX technology strategies. We have been working closely with them to implement solutions to enable them to service their clients while managing risks effectively via the electronic channel. Our clients look to KX as a long-term partner to deliver future-proof trading solutions, incorporating real-time analytics across the trade lifecycle, as well as algorithmic trading capabilities.

KX’s technology is widely in use throughout the buy and sell side – particularly in FX, where it supports institutions in designing, developing, implementing and supporting a broad range of mission-critical data and trading systems across front-, middle- and back-office operations. KX also offers a comprehensive FX trading platform (KX Flow), a trading strategies and risk management system (KX Algo), pricing and optimisation insights (KX FX Analytics) and a holistic 360 trade fraud surveillance and investigation package (KX Surveillance).  

KX has long understood and championed the transformative role that technology can play in capital markets. Digitalisation and e-trading have transformed how people and institutions trade, and the types of traders operating now compared with 10 years ago. Central to this transformation has been the ability to better capture, manage and analyse the vast amounts of data being created and then act on those insights in real time.

One area in which real-time decision-making is is producing a significant impact is in pre-trade. Until recently, organisations have focused on post-trade analytics mainly due to the challenges around generating pre-trade analytics. The amount of data needed to be captured and analysed and the processing power required to do this, given time sensitivity, was prohibitive. In implementing a full analytics solution for buy-side clients in the region, the KX platform has proven its ability to overcome these challenges, enabling traders to not only increase speed and effectiveness of execution, but also improve modelling across multiple asset classes at the same time – this is a significant differentiator between KX and its competitors. 

The future for the financial services and capital markets sector is more digitisation and automation – some by choice, some not. Better use of data will enable organisations to deal with the challenges and maximise the opportunities that will also present themselves.

KX has been at the frontier of data-driven innovation in capital markets for more than 20 years, and continues to evolve its platform to help clients keep pace with this rate of change. Launched earlier this year, KX Insights is a cloud-first, real-time analytics platform that offers all the benefits of KX’s world-leading streaming analytics capabilities with the efficiencies and flexibility of a cloud-based computing architecture. Deployable fully in the cloud, hybrid or even privately on-premise, KX Insights enables customers in Asia to add scale and efficiency to their real-time analytics programmes, meaning they can adapt quickly to different trading environments, regardless of how volatile and unpredictable they may be. 

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