FX traders at major banks are a dying breed as electronic dealing is taking over


66% of all forex transactions are electronic, to rise to 81% by 2018

A Bloomberg article is citing research from Boston based Aite Group LLC that 66% of all transactions in the currency markets in 2013 have been conducted through electronic dealing. The numbers are only expected to rise in the coming years reaching 81% of all spot trading by 2018. Is this the result from the rapidly expanding FX fix manipulation probe? Probably not – the trend has been ongoing since 2001 when only 20% of all forex transactions were electronic in their origins.

Just as stock traders have been disappearing form the stock exchange floors, bank forex traders are disappearing from the desks at major liquidity providers leaving their phone lines empty. It’s a natural progression and it might be leading to a more robust forex market that is not easy to manipulate. However our memories from the flash crash are not distant enough to ponder the risks associated with excessive reliance on technological advancements.

What the banks are currently doing is exactly trying to prevent the same thing from happening again – heavy investment in IT infrastructure and talent has been steadily replacing rich compensation schemes for foreign exchange dealers at major banks. Aside from cost savings, this can indeed result in a more efficient and transparent market place.

A separate report by Bloomberg is detailing that 2013 could have been a turning point for investors in quant funds that experienced capital outflows of almost $5 billion in the last quarter of 2013. As volatility waned and algos consistently underperformed last year’s steadily rising stock market, the benefits of trading with algorithmic systems has been put into question by investors.

In the forex world we have a standout amongst the ever-growing mass of algorithmic trading strategies in the face of FxPro’s SuperTrader. The average return on their top 3 strategies has totaled an impressive 25% since its inception in the middle of October 2013 until the end of January with 67% of all traders being successful. Close supervision of new strategies that are added to the company’s copy trading platform is aimed to guarantee at least a minimum level of performance.

For more on the global Forex industry see the LeapRate-Dow Jones Forex Industry Report.

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FX traders at major banks are a dying breed as electronic dealing is taking over

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