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The growing attraction of outsourced FX trading

Outsourced FX trading providers have seen growing interest in their services from a wider variety of clients during the past 12 months as fee pressures and coronavirus restrictions impact on fund managers’ operating models.

Photo: iStock

In a survey of buy-side equity traders in the US and Canada, recently published by Greenwich Associates, one third of respondents described outsourced trading desks as a good solution to help buy-side desks manage their flow while achieving best execution.

This might not sound like a ringing endorsement of outsourcing until you consider that only 20% of equity traders surveyed for the firm’s Market Structure Trading and Technology Study a year earlier, in 2019, expressed a similar view.

Benjamin Arnold, CEO of Meraki Global Advisors, says that a notable percentage of the product enquiries his firm has received during the past year were for structures that were either linked directly to FX or had FX components.

“Understanding the inherent risk in these complex products and how best to navigate and then execute the trade can make a significant difference to an asset manager’s performance,” he says.

Emerging managers continue to be a typical client for the industry, but not all emerging managers have the same needs
Benjamin Arnold, Meraki Global Advisors

Many of these requests have come from sophisticated mid-size hedge funds that trade global markets across multiple asset classes with assets under management (AuM) ranging from $250 million to $5 billion.


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