The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.


All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Foreign Exchange

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.

currency-symbols-data-chart-algo-960x535.png

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.

Despite broad acceptance that they introduce a measure of execution risk, as noted by a recent Bank for International Settlements (BIS) markets committee report titled FX Execution Algorithms and Market Functioning, market participants often reckon this downside is comfortably outweighed by the benefits.

Execution algos provide traders with more direct control & parameterization of their execution
Daniel Chambers, BidFX
Daniel-Chambers-BidFX-686x596.png

“All traders need to understand the trade-off between reduced market impact and added time risk,” says Daniel Chambers, head of data and analytics at BidFX, an FX trading solutions provider.

“Execution algos provide traders with more direct control and parameterization of their execution.”

On top of that, end-users can in many cases tolerate much more variance than dealers, and can therefore take more time with execution, minimizing market impact and improving execution quality.

The trend towards a hybrid FX market structure has been going on for a number of years, with an increasing proportion of flow – mostly in spot FX – now traded with end-users taking more ownership of the execution risk.

“The


You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree