Welcome to our Insights page. Here you will find a selection of interviews, reports and surveys curated for our members, by our members.
We asked 80 head traders how their trading strategy changed during high FX volatility in Feb/March 2020:
David Byne from Northern Trust summarises the Algos discussion from a recent meeting of our West Coast members:
A checklist of key findings from an intimate meeting of European Head Traders:
- Justifying the explicit costs of using algos can be challenging for those that are looking to scale up use
- Curated liquidity pools and the ability to adjust algos in-flight are important selection criteria
- 5 algo providers are leading the pack when it comes to in-flight customisation:
- BAML
- JP Morgan
- BNP Paribas
- Goldman Sachs
- Morgan Stanley
- Benchmarking against risk transfer prices can be challenging. You are unlikely to be able to reliably estimate a price for the full trade
- There are concerns around ECNs in liquidity pools so curating your liquidity is important
- For those not using algos, deciding which provider to onboard first can be a challenge as not all funds may have access to enough relevant data
- Algos for Swaps and Forwards could be coming sooner rather than later
- Rules-based smart order routing is a goal, but getting the resources to invest is difficult
- Users that normally trade large sizes through algos have reduced this threshold due to liquidity conditions this year
- Removing ECNs from flow has led to significant improvements
- Some participants increased their algo use among high volatility, and some used them less.
- Algos can be used to limit spreads in volatile markets, or find liquidity in Emerging Markets at traditionally illiquid times
- Start off using a small number of algos and build up data on them so you can see how they are working
- Consider a traffic light system for your panel:
- Green – signed off, compliance approved and to be used at will
- Orange – Use with caution. These are algos you are testing or trialling
- Red – Something has gone wrong. Don’t use the algo and make sure the provider explains what went wrong and why it wont happen again before moving back to orange (or not!)
- TCA on algos needs to be carefully considered – how are you going to break up trades and how are you going to measure this?
- You need to justify inflight customisation in flight by writing a framework for when and why you intervene. Doing so retrospectively is a challenge as getting accurate and relevant data is not easy
- Pre-trade analytics can help you explain why and how you use algos