oneZero CEO and co-founder Andrew Ralich highlights four key themes for 2024: better technology for banks, data quality for AI, more value from flow, and trusted 24/7 service.

In 2024, FX market participants can expect many opportunities to level the playing field through innovative FX technology solutions, as predicted by Andrew Ralich, CEO and co-founder of oneZero. He outlines four crucial themes for the year ahead.

The opportunities in 2024 stem from a need to find ways to extract more value from flow, stressing the importance of data quality for AI trading solutions and ensuring that support for vital trading technology is provided on a 24/7, follow-the-sun basis.

Technology is key to bank and broker outperformance

For banks and brokers active in sales and trading markets such as foreign exchange, the good news for 2024 is that recent technological advances enable a faster path to outperformance.

“oneZero works with our clients to deliver multi-asset technology solutions that drive intelligent performance, including modules with integrated analytics that function alongside existing legacy systems. That will be a key differentiator for banks in 2024 – especially regional banks that have an opportunity to increase revenue through enhanced pricing, risk management, and analytics tools,” says Andrew.

With a focus on P&L, oneZero plans to roll out a series of product enhancements in 2024 that provide real-time views into portfolios of market exposure to its clients. These new capabilities will be crucial as sell-side market participants adopt various strategies to optimize profitability and client experience under different market conditions.

Another bright spot for regional banks and sell-side counterparties is the increased potential of AI tools to improve hedging and liquidity management functions. But for AI tools to be effective, they need scalable data sets.

AI tools need robust FX data

“Regressive machine learning, neural networks, and GPT algorithms are powerful and interesting tools, but they rely on robust, uniform data sets to be properly trained and modeled. Many of the proposed ‘AI’ solutions for FX trading simply do not incorporate enough data to deliver significant performance improvements,” Andrew says.

“oneZero moves over 4TB of data into scaled cloud storage daily. Our track record of serving trading clients since 2009 drives our ability to deliver some amazing insights. That will provide another vital differentiating factor for our clients in 2024,” he adds.

At oneZero, AI is already being deployed to deliver tangible, actionable results to clients. For example, AI is used to analyze client flow and markouts. This analysis allows for a significantly more scalable and efficient understanding of clients’ trading styles and preferences. It can segment the information in many ways, ensuring that they are priced and risk-managed optimally. oneZero’s models allow a trading desk to look at their risk management and hedging strategies, providing insight into the impact of changes within their strategy and actionable analytics on improving profitability.

oneZero is also using AI to help clients avoid “negative inceptions” or trades accepted at a price worse than market mid, which are immediately loss-making. And oneZero is adopting machine learning to enable clients to optimize their FX trading technology, an enhancement already proving to be a massive value-add to our client base.

Extracting value from flow

Andrew stresses the need for the FX trading community to focus on increasing the value extracted from flow in 2024. “We will be talking to clients in the coming months about systematic hedging, and we have also developed a product to help operate a proprietary trading business alongside a brokerage,” Andrew says, adding that honesty, transparency, and disciplined execution are key requirements when setting up proprietary dealing technology solutions.

AI-driven tools such as oneZero’s Maker Pool Replay are part of the toolkit that will help clients evaluate how to extract more value from flow in 2024. The introduction of our Portfolios system will provide a real-time window into the impact of different risk management strategies on P&L.

oneZero’s award-winning Data Source is a next-generation cloud-based intelligence toolkit that captures trade data and transforms it into valuable insights that help clients understand their client flow, associated hedges, and their relationships with their liquidity providers. Reports include Maker and Taker Stream Classifications, Taker Login Classifications, Maker Pool Analytics, and much more.

Access to liquidity will be vital in 2024. oneZero has over 250 retail and institutional brokers, banks, and liquidity providers in our EcoSystem, offering unparalleled access to liquidity.

Trusted and tested 24/7 service

2024 is set to see changes in FX liquidity conditions that will test the quality of the operations support provided by technology suppliers.

A shift in North American settlement for stocks and bonds to a T+1 basis due at the end of May 2024 will have important implications for FX traders.

Most spot trades in the $7.5 trillion a day currency market will continue to settle on a T+2 basis.

This will pose challenges for non-US holders of US stocks and bonds who must settle their transactions on time and manage the resulting FX exposure.

“After meeting clients around the world, I worry that the shift to T+1 securities settlement could create FX market strains next year if traders don’t take steps now to ensure they have the right technology solutions in place,” says Andrew.

FX liquidity is best when all three global markets – Asia, Europe, and the US – are open. Average FX volumes fall at the end of the European afternoon, and liquidity is generally poor towards the US close. This is just when it will be logical to hedge US securities trades once T+1 settlement comes in next year.

Many legacy e-commerce systems require an end-of-day restart, ranging from several minutes to upwards of 30 minutes. Historically, many foreign exchange end users have begrudgingly put up with this inconvenience by trading either before or after that window. But as the markets move to T+1 settlement these outages will often be during the very limited time end users have to square their risks.

Remediating legacy systems is challenging and may not be accomplished in time for the shift in market practice next year.

oneZero’s systems, by contrast, have consistently operated uninterrupted at the end of day and present a distinct competitive advantage.

“Our functionality is backed by 24/7, follow-the-sun global operations support delivered by expert and highly experienced staff in Asia, Europe, and North America. Surprisingly, few technology suppliers can deliver genuine 24/7 global support, with the person answering the phone able to solve your issue, rather than simply taking a message,” Andrew says. “This is a simple but crucial way we will continue to support our clients in 2024, beyond just providing great technology solutions.”