$7 TRILLION

That’s how much is traded through the currency markets every single day. This is more than the combined daily volume of all major stock exchanges in the world. Inevitably, with such massive volumes and opportunity to make money, there are traps, pitfalls and challenges that must be overcome.

The first challenge is to eliminate the retail brokers addicted to B-booking trades and manipulating the market.

Currency trading naturally conjures up images of what most people see in the world of Forex with wild offers from retail brokers offering unimaginable leverages (sometimes 1000:1) in an effort to lure novice traders into thinking they can make money trading currencies.

Nothing could be further from the truth. In an overwhelming majority of cases, the trader never actually trades with a real bank and orders get internalised inside the broker’s own platform.

In a real currency market transaction (A-Book), the trades are meant to be cleared by a Prime Bank. In a B-Book environment, none of that happens. It’s like playing poker with the computer (or the house), where the entire setup is rigged against the trader.

UNDERSTANDING THE CURRENCY MARKET LIQUIDITY UNIVERSE.

Knowing who sits on the other side of a trade is absolutely crucial in ensuring trade integrity. There is enough liquidity in the currency market for anyone to trade and generate profits. However, as you begin to scale up trade operations and deploy more capital, traditional (retail) liquidity just isn’t able to cope with it.

Even some institutional liquidity requires to be customised to meet certain volume and ticket size requirements – which is neither easy, nor inexpensive.

However, in order for us to achieve our mission of Redefining R.O.I.™ it is absolutely imperative that we source optimum liquidity from multiple venues and align ourselves with key partners in this space.

That’s exactly what we have done.

Most people think of trend or momentum based strategies when it comes to the currency market. If not that, then a longer term carry trade. What escapes most investors is the understanding of what truly drives performance in the currency market.

For institutional investors, asset managers and HNW investors, this lack of understanding is perhaps the single largest reason why the bulk of asset portfolios lack a targeted and deliberate currency play.

The impact of volume per ticket and the ability to scale up capital deployments is a challenge that only a handful have been able to overcome. We are proud to say that we are among that small group of high frequency traders that have established the right liquidity partnerships to be able to trade high volume tickets with consistent execution performance at millisecond levels.

A Bit of Perspective: Ticket Sizes

Ticket size is the volume of units of a particular currency or asset that is traded each time an order is placed. To put it in perspective, take a look at the typical ticket sizes in the industry in comparison to the ticket sizes placed by our Algos.

Retail Traders

100,000 to 250,000

Most Prop. Traders

1,000,000 to 3,000,000

Institutional Traders

15,000,000 to 25,000,000

PWE Capital's Algos

20,000,000 to 100,000,000

The Speed Factor

In the world of high frequency trading, speed is undeniably a key factor in achieving consistently high performance. When we say, “our trades are executed at millisecond levels”, what does it actually mean? Here’s some perspective.

Below is the average reaction time (in milliseconds).

Blink of an eye

500ms

Mouse Click

380ms

F1 Driver Reaction Time

293ms

Fighter Pilot Reaction Time

114ms

Our Algos (< 10ms)

100% Quantitative Trading

Math-inspired trading models have existed for several decades. With the computerisation of the financial markets and the advances in computing technologies has made it possible for trading decisions to be made with mathematical precision, at speeds that are just not possible from a human standpoint.

However, quantitative trading isn’t at a point where algorithms should be allowed to run in a black-box environment with no human supervision. That’s neither possible, nor is it prudent from a risk management perspective. Hence, while our algorithms are 100% quantitative, all trade operations are performed under human supervision at all times – no exceptions.

This way, we utilise the human element in the area it is designed to perform at its best – understanding the fundamental nature of markets and assessing risk. The rest of the complicated bits (signal processing, order execution, in-trade risk management) are left to our super-fast algorithms that know how to perform consistently.

RISK MANAGEMENT

While risk management is a necessary aspect of all trading systems, with the volume of tickets we trade, our risk management approach is required to be above and beyond just “how much are you willing to lose per trade”.

We have deployed industry leading pre as well as post-trade monitoring systems that allow us to track our performance across multiple industry-recognised risk factors. From understanding the market retraction curves to assessing our trade costs, every aspect is measured, monitored and visualised in a way that is not just “reports on a screen”, but truly actionable insights that impact our bottom line.

Real-Time Broker Surveillance

Part of staying ahead of the pack is in knowing what the pack is up to. While we do not deal with retail brokers, we still have to use Prime Brokers and Non-Bank liquidity providers to clear our trades. That’s as far as anyone can go in this space.

Over the last decade, several big banks around the world have been exposed in the very act of market manipulation. Some got fined, while others escaped the wrath of the regulator with just a warning.

Given the importance of transparency of trade execution in our business, and because taking brokers’ word for it is a fools errand, we have resorted to keeping brokers in check by deploying industry-leading surveillance systems that give us unprecedented insights into how our trades are executed in real time.

If you’re a family office, an asset manager, or a professional investor, take a moment to learn more about our current investment program and explore the opportunity to grow your wealth in these challenging times.

For private placements from Family Offices and Professional Investors >

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