Alpha - September 2007 - (Page 44)

FX Electronic Trading in the Foreign Exchange Market price to six or seven different anonymous trading platforms in what I think is a reasonable spread for that particular size, and then I get a trade from every single one of those all at the same time, I don’t think anonymity is around that. I believe that a lot of genuine clients who want anonymity are being prevented from having that by some of the other players in the market. They are taking advantage of the plethora of platforms on the market, the fragmented liquidity and the ability to trade on that fragmented liquidity anonymously to make money. CONTE: Both Mark and Jeremy make good points, each client school, they tell you specifically that FX is not an asset class, but now you have a generation of people coming in and saying it may not be an asset class, but you can make a lot of money off of it. STEPHEN ALDRIDGE, Bloomberg: For many years, a small number of banks controlled the market and made a lot of money doing so. The buy-side has gradually realized that it was paying too much. Banks have become more efficient and made it easier for their clients to trade with them, bringing their own electronic systems in. The only reason they’ve done so is to hang on to as much of the business that they already have. Part of the growth is really just a lot of the hidden business that’s finding its way to the surface now. focuses on different aspects of the transactional process. Those who are sensitive to transparency will direct interest to those outlets which provide pure anonymity such as Bloomberg Tradebook From left to right: Chip Lowry, Global Link Europe; Stephen Aldridge, Bloomberg; and Laurent Develay, Fortis Investments DAN CONTE, Bloomberg: Technology. The continued evolution of technological advances is leading the way for both suppliers and consumers providing channels to access greater transparency within FX marketplace. Thus, community of market participants from traditional banks, investment houses, brokers, clients (institutional & retail) and software providers have substantially increased which has opened the gateway to broader universe consistently executing FX. As new participants become more familiar with various elements, FX market and traditional players enhance technology to support extensions of liquidity and information; many individuals are identifying transactional cost implications and alpha opportunities which exist in FX marketplace. MODERATOR: Does that impact the demands for anonymity? MARK WARMS, FXall: It’s not a question now of being transpar- FX. The need for this element of execution has definitely increased over the last few years with the inception of products like Tradebook and some other venues catering to market segments which look to discretely participate in FX marketplace. On the other hand, banks’ advancements in technical capacities and risk management have afforded trader’s ability to optimize managing anonymous flows. Again, I see this as a general progression of FX transactional space which is becoming more accepted by all participants and will only increase its profile over next few years. WARMS: While I understand a hedge fund wanting to remain anonymous to protect their trading strategy, they must recognize that in today’s markets, banks will figure out pretty quickly when they are trading simultaneously across multiple venues. Jeremy pointed out how they can recognize this activity and you can be sure that there are 10 other banks who can figure it out as well. To maximize their performance, the more experienced funds have learned how to work with banks and marketplaces to ensure uninterrupted access to liquidity. LOWRY: Anonymity is important but I don’t think we should overplay it too much. Hedge funds, for example, are not homogenous. Some hedge funds are trading foreign exchange as an asset ent as to where the market is at any given moment in time. It’s more that the larger players worry about who knows about what they’re doing and whether or not they can capitalize on that information. SMART: As someone on the bank side, I don’t really mind a client saying that they want to be anonymous and they want to go and trade on an anonymous trading platform. But if I’m making a 2 • Alpha Sponsored Roundtable • September 2007

Table of Contents Feed for the Digital Edition of Alpha - September 2007

Contents Letter from the Editor Longs & Shorts Pension Corner: Keeping the Faith The Good Guys: Going Public Interview: Barry Bausano - A Delicate Balance Cover Story: Cruel, Cruel Summer Profile: Phil Cooper - Alternative Flight Plan Strategies: Marshall Wace - TOPS in Its Field Profile: Fortis Investments - Banking on Alternatives Research Center: Top Equity Trading Firms Alpha Bytes: Desktop Duel Unhedged: Commentary - The Taxman Cometh

Alpha - September 2007

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