The trading and foreign-exchange heads surveyed by the organizers of the TradeTech FX conference in Miami have concluded that automation of the foreign-exchange currency trading operations is phasing out humans.
The market is embracing electronic and algorithmic trading, and the Coalition Development Ltd. has estimated that from 2012 to 2016, banks cut front-office sales, trading, and research headcount by about a quarter in Group-of-10 foreign exchange.
Some of the world’s biggest banks have also been attracted to automation after being entangled in currency-rigging scandals that resulted in more than $10 billion in penalties. A former HSBC Holdings Plc executive was the first to be convicted of front-running last month after the revelations prompted global investigations.
“These scandals just accelerated that move” toward automation, enabling investors to execute orders online and get better prices almost instantly, said Paresh Upadhyaya, a portfolio manager at Amundi Pioneer Asset Management, which oversees roughly $83 billion. “It gets people a little nervous and more accepting of regulations,” said Upadhyaya.
The survey also showed that market participants have room to increase the amount of trading without human interaction, with 62% of respondents having automated only a quarter of their flows or less. Only 8% said they had automated more than half of their flows.
“It’s an irreversible trend,” said Upadhyaya. “The focus in money management clearly is best execution for our shareholders, and it’s also important to keep expenses down.”