The founder of Hotspot FX and LavaFX said new venture Ogg Trading would work alongside quantitative trading specialist Pragma Securities to offer clients “a major competitive edge” in obtaining best execution across the market.
“Algorithms can really increase benefits of execution, and the tools we are bringing out are a new way to look at the challenge,” Ogg told EuromoneyFXNews. “The primary factor is to get the best all-in price for the client.” The new venture will be operational in the second half of the year, Ogg said.
Unlike investment algorithms that help determine which currency pairs to trade, execution algorithms focus on how and where to trade. Pre-programmed algorithmic coding looks for certain market conditions according to an agreed strategy and then executes an order when those conditions are met.
Electronic trading volumes (outside one and two day trades) fell around 10 percent in the year to the fourth quarter of 2010, according to research firm Greenwich Associates, dragged lower by fewer retail participants.
However, the share of FX market participants trading on electronic systems increased to 62% in 2010 from 61% in 2009. Market participants employing eFX increased the share of their total foreign exchange trading volume executed through electronic channels to 68% in 2010 from 64% in 2009, according to Greenwich.
Products such as MorganStanley’s FIX and JP Morgan’s AlgoX’ suite of algorithmic execution tools compete with third party vendors in the increasingly crowded electronic trading and best execution space, with dealers often providing dark pools of liquidity off their own order books.
“Best execution can mean different things to different clients, but we focus on providing a transparent volume average weighted price proxy (the Morgan Stanley Fix), over the period you want to trade” said Peter Eggleston, head of Morgan Stanley’s quant solutions group. “We have also done a lot of work on analyzing when liquidity fluctuates across the trading day.”