Investment banks throw toys out the pram with new FX trading platform
Fourteen investment banks, including some of the biggest names in foreign exchange trading, are setting up a new trading platform so they can escape the pressure from high-frequency traders (HFT).
Citi and JP Morgan today joined ParFX in a bid to duck out of the HFT arms race which has seen increasingly huge sums spent on technology to give traders an advantage of minute fractions of a second over their rivals.
For most trades banks do not need that speed, whereas some hedge funds and others benefit from the tiny speed advantages.
So the banks have thrown their toys out of the pram and are refusing to play with the big boys, abandoning the shares platforms to give their backing to ParFX.
To thwart the HFTs, the platform uses a “randomising matching engine” to add a few fractions of a second to each order, removing the time advantage of faster traders.
Daniel Marcus, CEO of ParFX, claims it “brings a simple, practical and versatile solution” to traders.
It will certainly save banks from spending millions to save a few microseconds.