Looking Back At May 6th

Last week ended with a bang.

The Wall Street Journal reported on Friday that on Thursday, “At one point, the euro fell 8% against the yen, ending down 5.5%. Given currency traders’ leverage, some may face crushing losses.”

Further: “Despite the euro’s 0.75% gain versus the dollar Friday, it suffered its worst week since the height of the global crisis in October 2008. The common currency was down about 4.4% from last Friday and down about 11% since the end of 2009.”

The New York Times reported that “The major indexes gyrated on Friday before closing down sharply on continued fears that the Greek debt crisis would spread and lingering questions about Thursday’s sudden plunge.”

So, was it a bad trading day all over? Here is a different tune from ForexMagnates, an FX blog that is written by Michael Greenberg: “What follows is Integral press release which states that Integral not only didn’t experience any difficulties but also pretty much enjoyed the day. I don’t yet have the exact details regarding who failed to deliver and who passed this crazy day unscathed but it seems that Integral’s aggregation model is working.”

Doing extremely well in the face of adversity

People use the term ‘stress testing’ when they subject a system to the kind of pressure that normally wouldn’t occur. Stress testing is often done to the breaking point. Thursday May 6 was nothing more than a global stress test for FX trading systems. Several single-bank systems and downstream STP systems reached their breaking point and failed at times.

Integral celebrated a record day without any service interruptions. Here is how we remember May 6, 2010:

  • More than 1,600 trades per minute processed
  • More  than 3.5 million rates per minute displayed
  • Clients orders executed throughout the day of up to 100 million Euros with immediacy and zero slippage from the volume weighted average price (VWAP)
  • New record volumes achieved, on an aggregated basis as well as for individual customers

The end of experiments

Thursday’s record trading activity separated the robust systems and business models from the experiments. As the provider and operator of FX Grid, we had a front-row view into the market activity. While a number single-bank feeds intermittently failed to supply liquidity, Integral’s aggregating dealer-driven liquidity remained rock-solid and delivered superior execution. Our high-availability systems provided non-stop access to pricing and execution, even in the face of outages from individual contributing banks and technology service providers. I guess, FX aggregation really works, if you got the right partner.

FX Week reported on Monday that “The return of trading to the traditional liquidity venues highlights the role of the broking systems at times of crisis. In so doing, the activity fuels the argument for multi-dealer platforms and underscores the benefit of using multiple sources of liquidity.” I couldn’t agree more with the second sentence.

We are very proud how flawlessly our systems performed and that we were able to help our partners take advantage of some very unusual market conditions and reap some profits.  I guess it is a zero-sum game after all.