Brexit is so confusing it's even confounding the robots.
FILE PHOTO: An anti-Brexit protester waves flags outside the Houses of Parliament in London, Britain, March 27, 2019. REUTERS/Dylan Martinez/File Photo
“The model signals are more quantitative driven and rely on historical data feeds,” said Neil Jones, head of hedge fund currency sales at Mizuho in London. “Brexit headlines have thrown a spanner in their works for the sheer number of characters moving the currency on a daily basis.” Rival Bloomberg has also pumped up the volume of Brexit content by four times since last autumn, running more than 1,000 headlines some days - such as on March 12 when May’s deal was defeated a second time, according to a spokeswoman.The mechanics of how Brexit may be hammered out have also made it more difficult for the computers.
Data is elusive on algorithms’ exact share in sterling trade, it likely mirrors broader trends — around 70 percent of orders in all currencies on the EBS platform, a major trading venue, are submitted via algorithms, the Bank of International Settlements estimated last September.There is no official data on what proportion of trade in foreign exchange is carried out by news-reading algos, but three currency traders at London-based banks estimated it was less than 10 percent.
“If it was your job and given the complexity of the Brexit story, do you really want to precode something to automatically infer and put material risk on the back of that,” said David Leigh, global head of FX spot and electronic trading at Deutsche Bank.Market makers who provide liquidity by offering to buy and sell currencies on their own account also use algorithms to set bids and offers. But confusion around Brexit has made that more difficult too.
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