Five years ago the futures markets were a relatively unknown industry.
They had barely been invented at the start of the millennium, and they were highly speculative in nature.
The market was built on the idea that the value of the underlying asset, like stocks or commodities, would rise or fall in response to market conditions.
It was a complex game and people in the financial world did not understand it.
The futures market has since become one of the world’s biggest, with billions of dollars invested each day.
The investment industry needs to understand what makes futures markets so attractive, says the chief executive of the Australian Financial Services Commission, Robyn Williams.
“You need to understand that the way in which you create these contracts is that you are putting them into the market with very little risk,” she says.
“The risk is on the side of the parties.”
She says the underlying financial instruments are typically not structured in such a way that the market makers can be sure they are getting what they paid for.
“If the value is in the contract, the market is going to go through the motions and the market will get it and you don’t have to worry about that,” she said.
This is a very big question.
There is a lot of money in the market and there are so many different types of contracts that you can have in the system.
So how can you know what you are getting?
That’s the question that Robyn is trying to answer by working on the futures trading platform Futures, which aims to answer the question.
Futures is the first system to allow investors to invest in the markets directly through a simple mobile app.
“It’s a new, innovative way of investing that puts the responsibility on the market participants to provide a clear, concise and accurate market data to the market, and that’s really what this service is all about,” she explained.
The system uses a proprietary, computer-aided platform called Flopto that is able to recognise and analyse the fundamental information in a contract.
It then uses a simple algorithm to predict how the price of the contract will move in real time.
“Our team is a bunch of guys who have been working on this for over a decade,” she added.
In a recent paper, published in the journal Science, Futures co-founder and chief executive Alex Rutter and other Futures developers, including former Citi economist Robert Siegel, showed that the futures system can beat conventional models of investment. “
They are making a contract with a lot more information that they can sort through and see what the market thinks about the contract.”
In a recent paper, published in the journal Science, Futures co-founder and chief executive Alex Rutter and other Futures developers, including former Citi economist Robert Siegel, showed that the futures system can beat conventional models of investment.
“What we are seeing in the data is not something that’s coming from an algorithmic model, but from a human-powered approach to investing,” Dr Rutter said.
Dr Rattle’s paper, titled “A Human-powered Forecasting Model for Futures Markets”, shows that futures markets are not like stocks.
“There’s no algorithm behind the futures,” he said.
“A human is actually doing it.”
Dr Rittle said the idea behind the platform was to provide investors with a more direct way to access information on futures, but he said it was also about bringing together people who are experts in the field and the financial markets.
“We don’t want to get too far ahead of ourselves,” he explained.
“This is a new product, and there’s still a lot to learn and we need to get to grips with some of the issues.”
The platform has been designed to be easy to use, but it will also be able to detect certain types of arbitrage opportunities.
It uses a sophisticated algorithm that calculates the volatility of a contract and then uses that information to determine if the market has entered a price war.
Futuring, like other types of investment, involves making complex financial decisions and the underlying information provided by the market makes it easy to spot arbitrage and buy and sell futures contracts.
The team behind Futures hopes the platform will help it improve the way it manages risk.
It will also enable the market to better predict and act on financial market developments.
“To the extent that futures is an industry that is being disrupted, then we are going to be seeing changes in the way we think about risk management,” Dr Williams said.