Greenwich Report Sees Algos Becoming “Increasingly Popular” in FX

A new report from Greenwich Associates sees algorithmic execution becoming “increasingly popular” among FX traders and argues that traders currently not using the strategies, “may soon have to determine whether they’re putting themselves at a disadvantage by not leveraging all the available tools to achieve the best outcomes for their institution and clients.”

The report does observe that many buy side traders remain reluctant to opt for fee-based execution, although it argues that those that have used algos have discovered that their overall execution costs have dropped “meaningfully”.

FX: TCA use creeps up but benefits still evolving

The impact of transaction cost analysis (TCA) on the FX buy side remains hard to quantify, despite the relative maturity of the technology.

Research published by Greenwich Associates and based on interviews with buy-side traders around the world indicated that 58% of FX trading desks were using TCA systems.

The research found that FX TCA was ahead of fixed income in terms of buy-side adoption, driven in part by a more easily accessible data set for analysis and the increasing usage of algorithmic trading and electronic trading venues.

FX Connect Partners with BestX on TCA

FX Connect is partnering with trade technology software provider, BestX, in order to offer transaction cost analysis (TCA) solutions globally.

“We’re taking what we consider to be an extremely impressive set of TCA functionality that enables outof-the-box integration between the two platforms and offers customers what essentially a turn-key integrated solution that supports the TCA required to underpin best execution policy evidencing and execution,"

David Newns
Head of execution solutions for Global Link

BestX: FX Code may bifurcate liquidity in 2018

The FX Global Code of Conduct could bifurcate liquidity and force venues to manage additional pricing streams, as the industry splits into those who have committed to the Code and those who will not.

“I think 2018 is going to be the year of the Global Code of Conduct,”
Pete Eggleston
Co-founder, BestX

Fintech start-up of the year: BestX

At the top-left of the screen is a set of five traffic-light indicators, summarising the execution of a large spot foreign exchange trade. It’s good news – four of the lights are green, one yellow.

The rest of the dashboard explains why: a set of speedometers show how quickly the order was filled on average, along with the risk of signalling the trade to other market participants; a bar graph shows the actual and expected impact the trade had on the market; a more complex chart shows the progress of the order, with volume increasing cumulatively in the background and circles showing how execution steadily switched from passive to aggressive as minutes passed.

This is a demo, showing some of the ways clients of BestX can track the quality of their foreign exchange execution, and users say it is far richer than anything available before the firm launched in 2016.

Emerging Frontiers on the Data Analytics Battlefield

Probably the biggest change in the FX market over the past 10 years has been the availability of data. This is not to say that we never had data before, most voice traders relied upon their brokers to tell them where the market was – and although it was (very!) unreconstructed, it was data.

In terms of hard numbers on a screen, the market was revolutionised by Reuters terminals in the 1970s, enhanced by the launch of rival offerings (nearly all borne out of a news service), and then again with the launch of electronic trading and mobile apps.

BestX launches reporting module, partners NAB

National Australia Bank is the latest bank to partner transaction cost analysis (TCA) provider BestX to give its buy-side clients third-party analytics services alongside its existing offering.

BestX has signed several deals this year with banks such as BNP Paribas, HSBC, JP Morgan and RBC Capital Markets, as well as non-bank market-maker Citadel Securities.

BestX also announced on October 30 that it has expanded its suite of best execution analytics by launching a regulatory reporting module

Best execution: what role do FX algos play?

Market participants are increasingly incorporating FX algos in their best execution process, but this doesn’t mean they are the right option every time.

The use of execution algorithms in the FX market has increased significantly over recent years and it would appear that this trend is set to continue for the foreseeable future. This is partly due to the growing focus on best execution.

Under the MiFID II European directive, best execution requirements mandate firms to take all sufficient steps to obtain the best possible result for their clients, taking into account a variety of factors.

However, this is unlikely to be the only reason for the surge in interest.

Tightening up on Transaction Cost Analysis

An industry-wide focus on best execution and Transaction Cost Analysis (TCA), driven by Markets in Financial Instruments Directive II (MiFID II) and wider industry changes, should lead to a more informed buy-side.

Best execution is a well-worn concept in wholesale financial markets, and its pursuit is one of the common objectives that unites trading desks across asset classes. But with changes in market structure and regulation, as well as the increasing sophistication of asset managers and the technology available to them, best execution is a rapidly evolving discipline that is fast reshaping trading practices.

BNP Paribas partners BestX

BNP Paribas is the latest bank to partner transaction cost analysis (TCA) provider BestX to allow clients to access independent analytics to verify the quality of execution.

BestX, which aims to become the industry standard for TCA and analytics, has already signed a number of significant deals this year with banks such as HSBC and JP Morgan, as well as non-bank market-maker Citadel Securities.

Trading firms look beyond equities with new analytics tools

Trading firms are looking at new analytics tools in the foreign exchange and bond markets, as new regulations increase the pressure to prove end investors are getting the best value for money on trades.

The market-maker Citadel Securities today said it had struck up a partnership with BestX, a London-based fintech startup that provides analytics on trades conducted in the vast FX markets.

Citadel Securities Inks FX TCA Deal

Nonbank market maker Citadel Securities has partnered with startup foreign-exchange transaction cost analysis provider BestX to provide Citadel clients independent analysis of their FX trades.

“Quality execution and transparency are at the core of our client offering and partnering with BestX helps us demonstrate this,” said Kevin Kimmel, global head of eFX at Citadel Securities. “We have always supported transparency in the marketplace and view this partnership as another important step forward.”

The market maker has been raising its profile in eFX trading over the past year and more than doubled its average daily volume in 2016.

“Citadel Securities’ adoption of our FX Analytics moves BestX another significant step towards our goal of being the industry standard for FX TCA,”
Oliver Jerome,
Co-founder, BestX