”For us, the easiest thing to do was to partner with somebody who could help us explore exactly what it is that we should be thinking about, with respect to our electronic footprint in the market and our voice footprint in the market,” the [source at a major FX bank] adds.
Before banks returned to innovating this year, senior managers and compliance officers working at them spent much of the past decade responding to regulations designed to make the financial system safer.
Allegations that at least a dozen of the largest currency dealer banks colluded to fix prices over a six-year period, ending around 2013, was another signal to Wall Street that its conduct needed to change. In response, public- and private-sector market participants got together and produced the FX Global Code of Conduct in May 2017. The principles-based document was seen as a last-ditch effort to stave off regulation in a section of the market that largely self-regulates.
Critics argued the document lacked teeth. But the Code presented a challenge that those outside the foreign exchange industry couldn’t appreciate: how does a buy- or sell-side institution evidence the 55 principles to which they are asked to voluntarily attest?
John Crouch, founder and chief executive officer of Ideal Prediction, decided to take on the heavy lifting. The firm was voted the winner of the Best e-surveillance provider of the year category at the 2019 FX Week e-FX Awards.
“Some banks felt like they could address the Global Code internally,” says Crouch. “Once they tried to do it themselves, they realised how hard it was to normalise the data, access all these very refined large datasets, extract intelligence, and do this on an ongoing basis. From a technical perspective, it’s pretty hard.”
Part of the challenge was establishing a standard of what everyone should be testing for, especially in an industry where a single term can mean different things to different participants. From the outset, it was very clear the technical mechanism behind any solution that Ideal would bring to market needed to facilitate a customised user experience.
[Banks] realised how hard it was to normalise the data, access all these very refined large datasets, extract intelligence
John Crouch, Ideal Prediction
Clients of the firm tell FX Week they are pleased with how Ideal has helped them mitigate electronic trading risks by bringing to market an offering that is “incomparable” when it comes to analytics.
“Ideal’s risk analytics are pioneering developments, looking at the market in novel new ways that others are not and extracting actionable recommendations from electronic trading microstructure datasets,” a customer says. “The award will bring deserving industry attention to an elegant solution for improving profitability and reducing operational risk.”
Although Ideal is only four years old, the track record behind its cross-asset solution spans approximately 20 years. Crouch leaned on his experience at large banks and high-frequency trading shops to guide the building of Ideal’s Scope platform, an automated voice and algorithm-monitoring service that includes natural language processing to help banks probe whether humans and machines are behaving as expected.
“Clients wear this risk – sometimes depending on the country they live in, maybe personally – and they may not have algo expertise in their background. So just having an independent firm check the system and make sure it is well sorted is something that is giving senior management a lot of comfort,” Crouch says. “Now, the banks are not as focused on the day-to-day perspective of solely addressing regulatory asks – they are thinking about how to evolve their businesses.”
But, as banks put the regulatory ills behind them, Crouch is also focusing on making headway among the buy side, whom he believes have a role to play in making sure risks are under control and good conduct is promoted in the market. The authors of the FXGlobal Code are still working to get more buy-side buy-in for the document.
“I think much of the buy side hasn’t even started to crack this idea of evidencing adherence. They just sign the letter to say, ‘we believe in this principle’,” Crouch says. “History has shown us that if some principles-based document exists, at some point you will be asked about it by some important group – that may be regulators or somebody even more aggressive. When you are in those discussions, having evidence that you were thoughtful about your decision to sign is really going to be useful several years from now.”
New York, May 1st 2019 - Ideal Prediction, the independent trading analysis and data science company for capital markets, today announced the addition of Natural Language Processing (NLP) to its automated analytics services.
By incorporating NLP with machine learning, Ideal Prediction’s service empowers clients to create and visualize new analytical graphs in real-time with no coding knowledge.
Prior to NLP, all potential cases required programming, offering only a prescriptive set of limited analytics. By adding NLP, Ideal Prediction enables clients to visualize and analyze calculations beyond those available in an out-of-the-box user interface (UI). NLP provides a flexible structure, with which clients can define for themselves what they want to visualize, creating a fully self-customisable monitoring service.
“Analyzing data using NLP and machine learning is incredibly difficult to achieve, because of the almost limitless combination of words and analytical outputs, but it is incredibly powerful,” said John Crouch, Founder and CEO of Ideal Prediction. “Clients are really pleased with this new functionality, as they are able to immediately create bespoke analytical visualizations, simply and easily, with no development queue.”
Ideal Prediction announced the launch of Scope in February 2019. The service automatically monitors order and trade activity, evidencing that humans and algorithms adhere to governance and risk controls, specifically in line with the principles of the FX Global Code (FXGC).
New York, February 25, 2019 - Ideal Prediction, the independent trading analysis and data science company for capital markets, today announced the launch of Scope, an automated monitoring service, which analyzes the behaviors of voice traders and trading algorithms in line with the principles of the FX Global Code (FXGC).
Already in production, Scope automatically monitors order and trade activity, evidencing that humans and algorithms adhere to governance and risk controls. It specifically highlights potential issues like last look, spoofing, flashing, layering, order violations, limit breaches, and P&L flags.
The FXGC was launched in May 2017. It is a set of global principles, developed in partnership by Central Banks and Market Participants to provide a common set of guidelines, which promote the integrity and effective functioning of the wholesale FX market. Market Participants are expected to review the behaviors of humans and algorithms, embed the principles into their day-to-day operations, sign a commitment to the FXGC, and post such evidence on public registers.
"Since the release of the FXGC, our firm has focused on evidencing adherence to the principles, but the service additionally helps senior management sleep at night," said John Crouch, Founder and CEO of Ideal Prediction. "Clients specifically value the independence of our service, in addition to our analytics technology and high-frequency trading expertise."
Ideal Prediction is further refining Scope, by adding checks that are collaboratively defined and agreed. It is working with a group of top tier banks, to create collective standards.
John Crouch added, “Not every check has a clear definition, so we collaborate with the FX community to provide standardized as well as custom checks appropriate to each firms’ business.”
Our firm is featured in an E-Forex article on FX analytics:
“TCA is the first step along a ‘grand path’ of evolution with analytics,” said John Crouch, CEO of Ideal Prediction, an independent trading analytics and data science company.
Ideal Prediction has developed a suite of tools for monitoring algo behavior, to meet MiFID II requirements for rigorous algo testing. Send a note to email@example.com if you would like to see a demo.
There are a few solution providers in this space, but at first glance, they appear to lack domain expertise with FICC products.
In February, Profit & Loss reported that GTX had partnered with Ideal Prediction, an independent trading analytics and data science company, to offer its clients analytics aimed at optimising their FX trading. GTX first hired Ideal Prediction to optimise client liquidity pools and trade execution performance in March 2016 and the perceived success of this project, combined with the management teams’ strong working relationship with Ideal Prediction CEO, John Crouch, from his time working at Credit Suisse, prompted the two firms to look for more ways to utilise the data at GTX’s disposal to help its clients. The end product of this was the analytics tool that GTX began offering to firms in February.
Liquidity Management, Strategy and Algorithmic Optimization, Transaction Cost Analysis to Improve Execution Performance and Risk Management for Buy and Sell-Side Market Participants
NEW YORK, 13 February 2017 -- GTX, the institutional foreign exchange (FX) arm of GAIN Capital Holdings Inc., and Ideal Prediction, an independent trading analytics and data science company, are offering clients FX data and advanced analytics to optimize their FX trading.
The market data, tools, and services enable buy-side and sell-side market participants to optimize profitability and simulate strategies as well as perform Transaction Cost Analysis (TCA). The new offerings further enable sell-side market participants to benchmark execution performance, analyze client flows, and optimize risk management strategies.
The analytics are powered by GTX’s rigorously maintained, fully anonymized, and aggregated tick data sets derived from programmatic liquidity and buy-side order flow on its FX ECN.
GTX hired Ideal Prediction to optimize client liquidity pools and trade execution performance in March 2016. The project’s success prompted the two firms to evolve the analytics for both the buy and sell sides.
GTX launched GTX Data Sciences in December 2016 to formally offer the analytics to its clients.
“The power and applications of Ideal Prediction’s robust, flexible analytics are clear to market participants, who are using them to improve their FX trading strategies and processes,” said Steve Reilly, Managing Director and Global Head of Liquidity, GTX. “From day one, Ideal Prediction’s tools gave us a deeper, more nuanced view of the complex dynamics within our ECN and we are excited to extend these benefits to clients.”
In addition to collaborating with GTX, Ideal Prediction provides data, analytics, and services to fixed income, currencies, and commodities (FICC) market participants. These analytics are provided through Ideal Prediction’s innovative Measurement as a Service (MaaS) platform and powered by real-time, anonymized, and derived FX market data from GTX’s FX ECN.
“GTX’s liquidity optimization team works in deep collaboration with its clients. Enabling them with a powerful set of market data and independent analytics was a natural next step.” said John Crouch, Founder and CEO of Ideal Prediction. “Our partnership will empower GTX and its clients to achieve each client’s self-defined goals. We look forward to helping GTX, GTX’s clients, and the overall market.”
About Ideal Prediction
Ideal Prediction creates value by optimizing client revenue and leveraging the firm’s data analytics and trading experience. Ideal Prediction provides turn-key analytics and tick data in addition to bespoke consulting.
Additional information at www.idealprediction.com.
GTX operates electronic trading venues and provides agency execution and clearing services for buy and sell-side institutional FX market participants.
GTX provides an array of electronic and voice trading solutions through its various entities including an ECN, prime services, a Swap Execution Facility for NDF trading, and a Registered Swap Dealer, which facilitates trade executions on an agency basis. Clients include banks, hedge funds, CTAs, fund managers, proprietary traders, brokers, and algorithmic trading firms.
Additional information at www.gaingtx.com.
About GAIN Capital
GAIN Capital (NYSE: GCAP) provides market access and trade execution services to a diverse client base of retail and institutional investors across a range of exchange-traded and OTC markets. Founded in 1999, the company today supports customers in over 180 countries via several globally recognized brands, including FOREX.com, City Index and GTX.
GAIN Capital is headquartered in Bedminster, New Jersey, with a global presence across North America, Europe and the Asia Pacific regions.
For more company information, visit www.gaincapital.com.