The distinction between AI hype and its actual applications in trading lies in the fact that much of what is marketed as AI is simply machine learning, a tool already used by financial firms for decades.
Increased computing power has allowed smaller firms and individual traders to leverage data more effectively. As trading changes, liquidity providers, risk management strategies, and instruments like gold and cryptocurrency are becoming increasingly important.
At the Finance Magnates London Summit 2024, Elina Pedersen, Chief Revenue Officer at Your Bourse, shared her perspectives with Yam Yehoshua, Editor-in-Chief, Finance Magnates, on key trends shaping the trading landscape.
The Role of AI in Trading Platforms
Regarding AI in trading platforms, Pedersen explained the distinction between AI hype and its actual applications. She noted that while AI is often marketed as a breakthrough technology, much of it is simply machine learning, a tool already used by banks and financial firms for decades.
“I think there are a few well first of all that very often AI is just the buzzword right so a lot of those things are really just machine learning algorithms that's been around for well decades," she clarified.
"It’s been used in trading; it’s been used in market making; it's been used in predicting certain patterns for really decades by banks and financial firms now.”
However, she emphasized that the real change lies in the increased computing power available, allowing smaller firms and individual traders to leverage data more effectively.
“Now there is enough computing power and enough frameworks to allow for smaller companies or let’s say individual traders to be able to analyse the data and build models and educate models and then implement it in their trading or companies,” she added.
The Changing Trading Environment
Pedersen also touched on how the trading environment is changing in response to these technological changes. She highlighted that Your Bourse, as an ultra-low latency trade engine, was always prepared for such advancements.
“For us as a trade engine, an ultra-low latency trade engine, we’ve always been ready for it in a way because we know like HFTs use models,” she pointed out.
She elaborated on the critical role of data processing, emphasizing how brokers generate vast amounts of data that need to be accessed, normalized, and utilized effectively.
The Role of Liquidity Providers
On the subject of liquidity providers, Pedersen explained their crucial role in helping brokers offer competitive pricing.
“The most important part of it is that brokers should understand the difference at the end of the day between the trade platform and what is the function of a trade platform or trading front end and an actual trade engine trade processing, order routing right and pricing,” she described.
She cautioned brokers against internalizing trades without understanding the associated risks, advising them to choose the right liquidity provider to ensure efficient execution and pricing.
New Offering from Your Bourse for Smaller Brokers
Pedersen also introduced a new offering from Your Bourse aimed at helping smaller brokers. She discussed a package for brokers under $1 billion in volume, which provides access to premium liquidity providers at no cost to help them start off on the right foot.
“If they become a client of one of the premium liquidity providers then we will give them a start package, a set of components that they need to start free of charge just to really help those brokers start in the most appropriate way.”
Looking Ahead to 2025
Looking ahead to 2025, Pedersen sees increased volatility benefiting retail brokers. She also noted the growing importance of gold in trading volumes, stressing that brokers need to adapt their risk management strategies accordingly.
She remarked: “I think what we should finally acknowledge is that the majority of trading volumes are currently generated in Gold and based on that we should make sure that our risk management and our trading strategies or risk management strategies reflect the most traded instruments.”
Pedersen also observed the resurgence of interest in cryptocurrency trading, signalling that the market could see new opportunities in the coming year.
“The majority of trading volumes are currently generated in gold, and it's quite a predictable asset. I also think the buzz around crypto and crypto trading is coming back as well,” Pedersen concluded.
