Algorithmic trading has proliferated across global FX markets over the past decade. Today, roughly 20% of the institutional foreign exchange trading volume is now executed through algos. FX algo usage is following that of the equities market – where algos currently account for more than half of all equity trading volume. So what’s behind all this algo growth?
Most interaction with wholesale FX market venues will involve the use of some form of decision “algorithm”, in addition to those services that are traditionally thought of as “automated execution algorithms”. It is essential to design these systems for safe, orderly operation and for regulatory compliance. The various regulations provide many aspects to consider in relation to the deployment, operation and review of algorithmic trading. We present below some high-level points for thinking about algorithmic systems in FX, the regulatory issues that apply, and the implications for systems design and algorithmic choices.
With Mark Goodman, Global Head of Electronic Execution (FX, Rates, Credit, Futures) at UBS Investment Bank, Scott Wacker, Global Head of e-commerce Sales and Marketing at JP Morgan, David Mechner, CEO, Pragma Securities, Nickolas Congdon, Head of E-Trading Services at Commerzbank and Fergal Walsh, Managing Director, Global Head of FX Algorithmic Execution at Citi.
Anna Reitman talks with leading providers to discuss how a new generation of FX algorithms, analytical toolsets and order routing solutions are giving clients more control over the way that their orders are placed, as well as access to more detailed pre- and post-trade analysis than has ever been possible before.
Algorithms have enjoyed persistent growth in the FX markets in recent years. And all the signs are for continued expansion, with more buy-side firms appreciating their ability to reduce trading costs and improve execution quality across an increasingly fragmented FX universe.
Regulatory change has further accelerated the need for institutions to take control of their FX execution process and show transparency throughout the lifecycle of an order. The trend we are observing requires the building of a process-driven execution policy, automation of low-value orders and the ability for a user to have full platform oversight, from inception to delivery.
QCAM Currency Asset Management is the largest independent currency manager in Switzerland and has been in the business for more than 13 years. It offers its own currency overlay services, FX best execution, FX single strategy v-Pro, and general FX advisory and liquidity management solutions. Clients include both public and private pension funds, asset managers, family offices and foundations. It is now in the very early stages of taking a closer look at starting to use FX algos says Andy Schümperli, from the Institutional Sales team at the firm.
QuantInsti (QI) is one of Asia’s pioneering Algorithmic Trading Research and Training Institutes, focused on preparing financial market professionals for the contemporary field of Algorithmic and High Frequency Trading. Headquartered in Mumbai with a subsidiary in Singapore, QI was founded by iRageCapital and a team of Quantitative and High Frequency Traders and domain experts dedicated to providing practical knowledge to professionals interested in Algorithmic Trading.
