When discussing the future of the FX industry finding consensus amongst market participants about what the market will look like and how it will function can be challenging.
Yet one thing that appears to be broadly agreed upon is that the use of algorithms for executing trades is likely to continue growing in the coming years, as technology continues to evolve and firms look for new ways to minimise their market impact when trading.
Indeed, the use of algos is often prescribed as the answer to a market where it is becoming harder to execute in size and buy side firms are increasingly concerned about this issue of market impact.
Currenex has launched a new trading platform, X2, designed in response to the changing liquidity profile of the FX market and the evolving requirements of institutional FX traders.
One important feature of the new platform is that it is based on HTML5 technology, in contrast to the Java-based multibank front ends that populate the market today.
Speaking exclusively to Profit & Loss Rick Schonberg, global head of product for trading and clearing and the North American head of trading solutions at Currenex, says that although Java “serves its purpose today and will for many years”, there are advantages to having an HTML5-based front end.
Lucera has launched two new products to complement their LumeFX platform
The LumeFX credit service provides pre-trade credit monitoring that can be set up on a hierarchical basis to alert prime brokers, or clients of prime brokers that are also extending credit, when one of their clients is reaching their credit limit.
“We’re getting a lot of traction in the prime-of-prime market with this product, following a shift in the industry where traditional prime brokers are not extending as much credit as they used to.
ITG’s transaction cost analysis (TCA) product for FX is now integrated into the FX Connect trading platform.
This means that institutional investors on the platform can now use FX Connect and ITG TCA for FX to measure and analyse their FX trading to help demonstrate best execution.
The TCA product combines dealer, ECN and interbank market sources to provide a analysis covering spot, forward, swap, NDF and NDS transactions.
“Accurate FX trading data is the foundation of effective FX TCA analysis. The seamless integration of a client’s data from FX Connect to ITG TCA combines our deep FX analysis capabilities with robust data from the best-in-class platform for complex foreign exchange workflows. This creates an easy to use, powerful and flexible solution for institutional traders,” says Ian Domowitz, managing director and head of analytics at ITG.
In recent years the sell side has justifiably been criticised for its behaviour in the FX market. But should regulators and market participants be taking a closer look at how the buy side operates in this market? Galen Stops reports.
The FX industry has been rocked by a number of scandals in recent years and in many cases the implications of these scandals is only now coming home to roost.
Two of the largest custodian banks in the world, BNY Mellon and State Street, have agreed $714 million and $530 million settlements, respectively, related to allegations they systematically set disadvantageous rates for their customers in contrast to their claims to be achieving best execution for them.
Petra Wikstrom, global head of Execution and Alpha solutions at BNP Paribas, talks to Profit & Loss about why FX TCA benefits from “a pragmatic engineering approach”.
Profit & Loss: When it comes to producing meaningful TCA, what are the big data challenges facing market participants?
Petra Wikstrom: Over the last five years we’ve seen a constant uptick in the electronification of FX, but the number of venues offering FX liquidity has increased far beyond that, which means that similar volumes are now offered across more venues.
There’s a wave of change sweeping across non-equity markets driven by regulatory initiatives and the rise of non-bank liquidity providers. Other factors driving buy-side adoption of Transaction Cost Analysis (TCA) in FX are the need to generate alpha on investment returns, and regulatory scrutiny
of trading practices in over-the-counter (OTC) instruments.
TCA is a broad term which doesn’t describe the actual analysis to be carried out. Asset managers who rely on custodian banks to execute currency trades have a compliance obligation to analyze these FX trading costs.
By monitoring fill rates, TCA tools can help traders determine if ‘last look’ is occurring, and then decide whether or not to shift their trades to other venues.
BestX, formed earlier this year, has released its first TCA product. Colin Lambert takes a look.
If there has been a positive outcome from the trials and tribulations of the FX market in recent years it has been more focus on not only achieving best execution, but also about what that phrase actually means. This has resulted in more products and services aimed at helping clients make informed decisions around how they interact with the FX market – no longer is it just a sideshow that can be handled without due care and attention – as well as the gradual move into the market of new firms.
Thomson Reuters has partnered with BestX to enable buy-side participants using its FXall and FX Trading platforms to streamline analysis of transaction costs, helping them define, achieve and demonstrate best execution.
Through the partnership Thomson Reuters will offer connectivity to the independent transaction cost analysis (TCA) service from BestX from its FXall and FX Trading desktops.
Thomson Reuters customers will be able to have their trades sent automatically to BestX for independent post-trade transaction cost analysis, and also have a single sign-on desktop integration.
FastMatch has made its proprietary algorithmic and transaction cost analysis (TCA) services available to all its subscribers.
The firm has been offering algorithmic trading to asset managers via its AgencyFX product for the past 18 months to satisfy increasing demand from this customer segment for algorithmic execution products.
Now it will be offering it to both buy and sell side users of the platform. Clients using FastMatch algorithms will receive automated TCA reports upon completion of their orders showing the algorithmic execution performance versus arrival price, FastMatch midpoint and other benchmarks.