While economic growth has declined in developed western markets, Asia has emerged as an engine for wealth creation on the global stage.
China, Korea, India, Indonesia and Australia have risen as the fastest growing Asian economies over the last three years despite the financial crisis.
When there is concentrated activity and energy of this magnitude, investment flows. In Asia, traders and investors are seeking to go with precisely with the flow. What the industry is realising is that what energises the flow is a strong digital economy.
“Those who flow as life flows know they need no other force,” said Chinese philosopher Lao Tzu. Known as “wu wei“, the principle of effortless action. The premise is that when we go with the flow, all things become possible. When we go against it, we evoke resistance and obstacles.
In the financial sector, being wired and digitally armed is a key to moving with the flow. Exchanges in Singapore and Hong Kong are rolling out ultra low latency matching engines, as pan Asian investment in end-to-end algorithmic trading strategies ramps up.
Meanwhile, colocation hubs in Asian financial centers are set to challenge London, New York and Chicago. Investment firms are discovering how network rich colocation hubs enable them to be not only fast, but agile, cost-conscious competitive players.
The Art of Effortless Agility
With so much flux and competitive pressure, summoning the principles of wu wei means being fully integrated electronically into a dynamic and complex ecosystem of trading and clearing venues and financial digital content and technology service providers. Getting your data flow right is essential to your path.
Keep these key 5 elements central:
1. Get Ready, Get Connected
If you want to be part of the Asian phenomenon, immerse yourself in the flow of Asian markets. Establish your own distributed network of trading intelligence and digital services or use a broker who has one. If time-to-market or cost is an issue, cloud computing or Software as a Service (SaaS) solutions in the appropriate colocation hosting centers may provide an interesting, practical compromise.
2. Nurture a Healthy Ecosystem
The market ecosystem is a complex web of interdependency of all the participants in the value chain, the more these that are colocated within the same data center, the lower the total operational costs to trade. The health of the ecosystem depends on having the most diverse, best of breed providers available on demand, close to the important points of trading interest like markets or data sources.
3. Understand Where Liquidity Comes From
Liquidity does not just appear; it has to be mobilized by a complex supply chain. In effect every link in the supply chain is a network of relationships and resources to be leveraged as partners. So a digital network is not just a transport system for data, but a community of users who share a common infrastructure, just like a colocation hub or indeed a market. All the traders in that extended community are potential sources of liquidity.
4. Be Patient
Asia is punctuated by expanse, diversity and fast growth but things happen in their own good time and pace. Consensus and timing are very important. When speed is needed, network-rich ecosystems can mobilize resources quickly. When things move more slowly, shared, variable-cost infrastructures can keep costs down and offer other opportunities.
5. Learn to Lead by Following the Flow
Traders recognize this in the principle: “the trend is your friend.” In a digital market, every trader becomes both a follower and a leader. As a leader the trader takes his own trading decisions that aggregate into the market flow. As a follower the trader watches such market flows to anticipate their effects. Striking a balance between following and leading profitably is the natural art of successful trading in digital markets.
When we enter a new market, we need to learn or invent new rules, and not just assume that our old rules that evolved for another time and place are obviously somehow better. We need to keep our eyes and minds open to new ways of doing business.
Only by being in the flow supported by a knowledgeable, trusted ecosystem can firms navigate such whitewater rapids with confidence.
For further insight, read Equinix’s whitepaper Asia Pacific Markets: A Turbocharger for Global Trading Flows.