BestX RFQ Par Introduces a New Way to Look at Hit Ratios

The relationship between sell and buy side in FX markets has been eased in recent years by the advent of better data and analytical tools, however, this evolution has itself created occasional tension thanks to different interpretations of the data. One instance of this is hit ratios – a buy side client, or a third party, can provide a liquidity provider with their win rate, but is it a true reflection of that LP’s efforts?

RBC partners with State Street’s BestX to launch FX TCA service

The service uses BestX technology to provide RBC Investor & Treasury Services clients with FX TCA reporting to assess the execution quality of their currency overlay services transactions.

RBC Investor & Treasury Services (RBC I&TS) has partnered with State Street’s analytics software vendor BestX to launch an FX transaction cost analysis (TCA) service.
The new TCA tool will be rolled out for clients using currency overlay services (COS) at RBC I&TS with FX TCA reporting to manage and assess execution performance of COS transactions.

Price limits in FX algos: fill your boots

Do limits affect performance? Double machine learning helps answer the question, says BestX quant.

Foreign exchange execution algorithms often contain price limits, but there is a common concern in the market that setting the thresholds too close to the mid-price will hamstring the algo and hurt its performance. Two experiments we have run show traders need not worry.

Best execution product of the year: BestX

BestX has expanded its best execution governance and reporting product to include equities in addition to foreign exchange, commodities and fixed income. The multi-asset offering meets the need for a single provider that can measure costs consistently across asset classes. BestX analytics and software enable clients to codify their best execution policies and ensure they are fully implemented and monitored.

A peek inside GFXC’s algo cover sheets

Plans for new disclosures on foreign exchange trading algorithms are taking shape. The industry body tasked with overseeing currency markets is working on a list of items to include in ‘cover sheets’ that algo providers will be required to publish.

A new model for predicting fixed income trading costs

BestX, the execution quality analysis provider, has launched a new tool for fixed income traders to support their pre-trade capabilities.

The ‘Expected Cost’ model is currently in a beta phase, meaning it is being tested by traders as it is still under development, to enhance its potential capabilities and deliver feedback on performance.

“The latest product which came out this weekend, released a new feature,” explains BestX co-founder Pete Eggleston. “Coming up with a model to estimate the cost of transacting in each month, at a given time of day, and a size or number of units for a security. We have that model in FX, they are common models in equities but to our knowledge that does not exist in fixed income.”

FX market more interested in liquidity and data access than algo risk

The BIS markets committee might be fretting over how execution algos can exacerbate risk in the FX market, but others are more interested in what it thinks about liquidity indicators and access to data.

For those unwilling to accept any meaningful execution risk on their FX trades, trading on a risk transfer price with a dealer is the way to go – but there can still be a place for algos.

Balance and compromise within the Best Execution process

Best execution as a concept continues to be the subject of much debate across the industry, with both liquidity providers and takers, and asset owners, having different opinions and definitions.

This is no surprise given the relatively amorphous nature of the subject, it really does just depend on what you are trying to achieve, how you are trying to achieve it and why.

Best execution means very different things to different types of market participants. For example, a passive index manager will typically have a best ex policy that differs considerably to that of a pure alpha driven macro hedge fund, or a corporate treasury. Clearly, it is not possible to define a ‘one size fits all’ definition for such a broad spectrum of market participants, and therefore any technology solution needs to be flexible and configurable.

BestX launches post-trade TCA for equities

BestX, State Street’s foreign exchange and fixed income best execution analytics platform, has expanded its execution analytics software and launched a post-trade transaction cost analysis (TCA) module for equity markets.

Covering global stock markets, the new functionality provides clients with benefits of the unique BestX web interface alongside flexible data analysis, report configuration and generation.

“We responded to our clients’ needs by expanding BestX to provide a full multi-asset class offering,” says Pete Eggleston, BestX Co-Founder. “Whilst launching fixed income at the end of 2018, it quickly became clear that clients wanted one application to analyse all of their trading. The desire to consolidate data and vendors is a trend that we anticipate will accelerate over the next few years and we needed to ensure we were positioned appropriately for this.”

Choppy markets revive quest for RFQ’s ‘magic number’

Deutsche argues for smaller, stronger panels; Citi offers better prices for 'full amount' trades.

According to De La Soul’s 1990 hip-hop smash, the magic number was three – “no more, no less”, the group insisted.

Volatile FX markets reveal pitfalls of RFQ

Clients urged to mask trading intent; critics warn of subtle sell-side advantages.

Dealers are urging clients not to give too much information away when requesting foreign exchange prices, after the tactic backfired in virus-hit markets.

When obtaining a two-way price for a particular currency pair, some clients have been choosing to indicate which currency they are buying. The aim is to secure better liquidity but the result in volatile trading has been to move the price, making it more expensive to execute follow-on trades.

In choppy FX markets, algos buck expectations

Goldman, Nomura and others report increased volumes, although some clients revert to principal quotes.

Algorithmic execution of spot foreign exchange has increased as the spreading coronavirus has roiled markets in recent weeks – a surprise considering algo usage was widely tipped to decline in choppier trading conditions.

“We’ve seen an enormous pick-up in the use of algos in recent weeks,” says Ralf Donner, head of fixed income, currencies and commodities execution solutions at Goldman Sachs. He puts the increase at around 50%.