How SaaS revolutionized forex trading 30 years after Black Wednesday
By Vikas Srivastava, Chief Revenue Officer, Integral
Vikas Srivastava, Integral
In the world of FX, time does not pass. Hard to believe, but this month marks the 30th anniversary of the UK’s exit from the Exchange Rate Mechanism (ERM). The infamously Black Wednesday event took place on September 16, 1992, when the government was forced to withdraw sterling from the ERM after an unsuccessful attempt to keep the pound above the exchange rate floor set by the European Union.
Estimates of the cost vary – but the consensus is around £3bn (in terms of the cost to the UK Treasury). For a brief period interest rates shot up to 14% and Chancellor Norman Lamont authorized billions of pounds of foreign exchange reserves to be used to buy up sterling which was being sold on the foreign exchange markets. But amidst all the carnage and chaos that surrounded the value of the pound at the time, it’s worth remembering that most forex traders back then were still writing buy and sell orders on paper. A far cry from today’s technology-driven market, where financial institutions benefit from greater efficiencies, faster access to liquidity pools, tighter spreads and better pricing in a cloud-based environment. This begs the question, what are the differences between forex trading in the SaaS-powered world today compared to three decades ago?
If trading firms had been caught up in Black Wednesday today, they might have handled the situation very differently – especially since much of forex trading is done electronically these days. Companies could have reacted immediately to market changes through active risk management and dynamic pricing. Why? Because cloud stands for agility and flexibility. From a macroeconomic perspective, the cloud can act as a democratizing force for companies operating across the spectrum of foreign exchange globally. Our research shows that more than a quarter (28%) of global financial institutions expect their forex trading workflow to be entirely cloud-based within the next five years, and another 41% of respondents expect a hybrid arrangement within five years. This means that by 2026, more than two-thirds of the FX trading executives and senior FX managers we surveyed expect their trading operations to leverage cloud technology. It’s not hard to see why so many see SaaS as a strategic next step for their FX business.
The breakthrough of Software-as-a-Service (SaaS) in FX has undoubtedly given financial institutions more capacity to deal with the impact of shock macro events like Black Wednesday. Looking to the future, further developments in the cloud can be expected in the coming years. With these technology providers, participants in the forex market can get a head start while modernizing and growing their business, regardless of what the next big event in the forex markets might be.
SUBSCRIBE TO NEWSLETTER
And get exclusive articles on securities markets
Learn Crypto Trading, Yield Farms, Income strategies and more at CrytoAnswers
https://nov.link/cryptoanswers
Comments are closed.