Earlier this year smartTrade Technologies, a pioneer in multi-asset electronic trading solutions, received an investment from Hg, the largest European investor in software and services. That vote of confidence is helping smartTrade to accelerate its growth as a global leader in multi-asset electronic trading solutions.
We talked to David Vincent, CEO of the firm, to see how the business has been performing and in what ways the strength and deep domain experience of smartTrade is enabling it to help its buyside and sellside clients navigate the challenges of the recent market disruption.
The first six months of 2020 has proved challenging for many companies across numerous industries. How have smartTrade’s business and systems been performing during this difficult period?
This crisis has been a test for every part in the financial system. For those with the necessary infrastructure in place, they were able to withstand the major change in market behaviour and dynamics. Throughout this period we have been pleased with the robustness of our systems, which allowed our clients to trade through even the most volatile days of the crisis without any issues. The smartTrade solutions performed extremely well during times of stress, ensuring orders were filled and trades completed during critically important moments.
One of the primary reasons for our success was smartTrade’s trading engine, which allows for quick responses to changing market conditions, such as the trading environment during the spring. To put this in context, smartTrade saw overall volumes in March 75 percent above those we saw in February. Some clients saw volumes increase fourfold from their previous level. Through all of this, smartTrade’s solutions remained stable and available.
COVID-19 has led to significantly increased volatility across the markets. In what ways has this crisis been testing the resilience of FX trading workflows and trading infrastructures?
After a long period of relative calm, the foreign exchange market, along with the broader capital markets, swung into a period of historically high trading volumes.
The firms that fared the best were those who already had the infrastructure for remote, location-agnostic work rather than those dependent on physical, location-specific infrastructure. These prepared companies modelled extensive market disruptions through stress testing before the crisis. This was vital during days of extreme market swings, such as the so-called Black Thursday of 12 March. Those companies who succeeded – and we are pleased to count ourselves and our clients among these successes – could handle both high volumes and maintain stable platforms during the time of increased pressure.
How has smartTrade’s robust technology been able to assist your clients to mitigate much of the impact of the recent disruption?
The crisis has demonstrated the flexibility of our model and how it can provide clients with certainty in times of severe market disruption. Traditional FX execution contracts feature volume-based pricing, where clients pay on a per-trade model. This means spiralling costs in active markets, like the ones we saw this spring, as traders rush to respond to shifting market conditions. SmartTrade uses a flat model, which means costs are not dependent on volume. In times of heightened volatility, this can translate into significant savings – and prevent unsustainable spikes in trading costs.
Could black swan events like this encourage many FX trading firms to reassess their strategic investments in future technologies and the firms they choose to provide them?
Absolutely. Every black swan event broadens the definition of what is possible. Traders referred to the disruption around the Global Financial Crisis as a “once in a generation” disruption, but now there’s been an even sharper correction just over a decade later. Volatility and change may be the new reality for markets, and the industry is recognizing that in order to survive they need to prepare for the unexpected.
Every one of our customers has a different way of trading, and that’s going to continue. What we provide firms is the ability to create a trading solution that is scalable and flexible according to their needs both today and tomorrow.
Once this crisis is behind us where are you expecting to see increased demand for smartTrade’s products and services?
As we pass through the intensive phase of the crisis, we expect that markets will enter a “new normal,” with increased volatility and enhanced pressure on fees. We expect that firms who were caught flat-footed during the early stages of the crisis will move rapidly to correct any exposed weak areas in their infrastructure. This may include new partner or vendor relationships to gain instant credibility and experience in a particular area.
The crisis has meant that people have had to remain operational, in significantly more volatile markets, with disruption hitting their ability to execute. Firms are realising that smarter, faster and more flexible technology is now essential to keep them ahead of the competition, with or without a major global crisis. Firms need tools that automate trades in ways that are highly configurable and flexible and fit inside their existing workflows. The companies that adopt these kinds of solutions are the ones that will succeed.