FX algo and TCA discussions at the recent TradeTech FX conference in London

In September, TradeTech FX London returned with a new hybrid flagship conference format, with speakers and delegates convening in person at the Hurlingham Club in London, joined by further speakers and delegates online. FX algos were once a key focus across the two days, with dedicated roundtables, an in-person interview and a virtual All-Star panel among the leading FX algo and TCA discussions.

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Source: Richard Hadley

Moderating the panel on building a ‘best in class’ FX dealing desk was Michael Melvin, Executive Director, Rady School of Management, UCSD & Pacific Center for Asset Management. Joining him to discuss the latest platform and data offerings to drive algo execution strategies and improve access to liquidity were: Michael Eyre, Global Head of FX Trading at Vanguard; Liakos Papapoulos, Senior Investment Manager, Treasury at MN Investment Management; Yann Couellan, Head of FICC Trading at BNP Paribas Asset Management; Andreas Anschperger, Head of FX Trading, Europe at Allianz Global Investors and Richard Kiel, Global Head of FX Solutions at KX.

An audience poll running during the panel asked delegates to share what fraction of their flow is traded using algos. The majority at 74% of the audience opted for 0-25%, while 11% said they traded 75-100% of their flow using algos, 11% conducted 25-50% and around 4% said that 50-75% of traded were using algos.

One panellist added that they also fell into the 0 to 25% bucket, with one of the primary reasons being that the predominant proportion of their business is swap based. Typically they said they would use algos for the larger outrights, but that just overall doesn’t make up as significant a proportion of their businesses as the swaps do. When asked to also share their wish lists for the best in class dealing desk, one panellist said that top of their list was clean data.

Making sure that their mappings hadn’t broken or changed was a big job, so that was one of their biggest issues or concerns. A fellow panellist said they also envision an execution framework that is completely data driven, which they are starting to build for FX.

Their top priority was data driven execution based on solid data science and having that approach streamlined, in the future is something that they said they will be working on.

Source: Richard Hadley

WBR Insights Survey

In Q3 of 2021, WBR Insights also surveyed 100 Heads of FX Trading and similar from buy-side and sell-side firms across Europe, to find out about the challenges they are facing in 2021 due to the impact of the COVID-19 pandemic, and the innovative solutions they are putting in place. One focus was on the use of algo wheels in FX, the majority of heads of trading (60%) saying they believe the use of algo wheels in FX will continue to rise as the use of algo increases on the buy-side.

“The next survey by TradeTech may well show that the 40% who didn’t expect an increase in the use of algo wheels have gone and bought one,” – John McGrath

“The next survey by TradeTech may well show that the 40% who didn’t expect an increase in the use of algo wheels have gone and bought one,” said John McGrath, Chief Revenue Officer, BidFX.

As buy-side investors become more sophisticated, the survey also asked if buy-side execution desks will ‘buy’ or ‘build’ their own algo wheel in the next year? Some 54% of respondents said that buy-side execution desks will need to buy an off-the-shelf product, while 31% said they have the budget and expertise to build this in-house. A further 13% do not forsee the rise of algo wheels in FX while only 2% already had their own algo wheel.

According the report’s conclusion, the future of European FX trading will be one where algo trading dominates due to its speed, efficiency, and ability to provide detailed analysis. However, as the majority of firms adopt advanced algo capabilities in their execution strategies, human judgment will still play an important role since it can help detect algorithmic weaknesses and make tactical adjustments.

 

Source: WBR Insights survey Q3 2021
Source: WBR Insights survey Q3 2021
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