DATA SCIENCE POWERS ALPHA GENERATION
The next-generation data platforms currently on offer cater equally to the buy and sell-side. Thanks to customization, these platforms throw up a variety of data-backed conclusions and firms can use them as their business demands. For instance, sell-side traders can use these insights to figure out who their most profitable client is and the value each client brings to the business relationship.
Insights such as these help them prioritize their time better. Spotting execution trends is also simple with these platforms. For instance, Mosaic’s Smart Data platform highlights decreasing business from certain clients and provides analytics to suggest possible causes. Firms can customize the degree of insight they receive from the platform and the data views they wish to dissect.
Mosaic’s platform also makes it simple to evaluate order flow proportions and correlate them to client behaviour. In essence, traders have a worldclass quantitative analyst by their side discovering market and client anomalies and summarizing important data when requested.
Everything from a client’s seasonal flow to their lifetime value is automatically calculated, and traders don’t need special technical knowledge to make these algorithms work. Depending on a firm’s wishes, Mosaic’s platform even suggests future courses of action, thanks to its AI-powered algorithm.
“The key benefit of next generation FX data platforms such as Mosaic is enabling banks to be smarter than ever when it comes to gaining a comprehensive view of their data and extracting value from it,” says Hodgson. “Productivity is key to retaining a competitive edge, and AI can allow the FX desk to predict its clients’ needs far more effectively and, ultimately, drive more business.”
Liquidity-level data analysis offers significant advantages to buy-side teams. Especially relevant is data’s ability to isolate the most effective areas of business in a trading operation. Does the firm have enough access to liquidity to exit their trades efficiently, and so on?
LPs and sell-side firms can compare their datasets to the broader market to analyse gaps in their business. Data analysis also allows for benchmarking opportunities, and banks can use these datasets as a selling point. For instance, comparing current execution data to historical benchmarks provides banks instant feedback regarding standards. They also enhance execution transparency and help clients understand where they stand.
BidFX offers its clients the ability to annotate data, thereby simplifying policy management. Clients can annotate change points in their data and easily measure effectiveness post-change versus historical. This ability to derive real-time conclusions makes it easy to leverage datasets. BidFX is also optimistic about its Verdict system. This system allows its clients to define trade execution parameters (spread, speed, etc) in line with internal cost control policies. These checks take place pre-trade and reduce the chances of a post-faulty trade post-mortem. Data from this system can also enhance client-LP relationships.
Clients can share data with their LPs and explain their decision to either choose the LP or an alternative source. “Clients will move away from only looking at execution costs and TCA, but also analysing liquidity provision. This is easiest done with platforms already collecting the data as it is large amounts of data on a daily basis,” says Chambers. “They are also using analytics less often solely for box-tick regulatory reasons, but more and more for actual execution or strategy improvement.”