According to the recent Algorithmic Trading Survey 2021 conducted by Aite Group and published in The TRADE, traders turned to tried and tested algo strategies in times of market volatility. The rise of foreign exchange algorithms has grown over the years, particularly in spot FX trading, where minimizing spreads paid and reducing market impact translate into cost savings, says Audrey Blater, Ph.D. Research Director at Aite Group. Today, about 20% of FX is traded algorithmically and this set to grow. “Intuitively,” says, Blater, “portfolio managers dealing with an array of asset classes welcome more innovation that helps to spread trading across smaller teams. Roughly half of the traders we interviewed suggested that the need for better pre-trade analytics and improved algos would be most important in the next 12 to 18 months. The strong desire for improved automation is also apparent with additional analytics and transparency coming into the market from sell-side firms. Looking forward, the development of robust algos across a greater range of products is in store. The focus on peer analytics and data is set to unlock additional capabilities. Algos designed to access Peer-to-Peer FX liquidity are in a nascent stage; however, the desire to find new, friendly flows is strong, and market participants anticipate increased interest in this type of trading”, she notes.
