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Foreign Exchange

FX: Pros look at best uses of rules-based order routing

Rules-based order routing (RBOR) has become a useful tool for achieving increased trading efficiency, although it does not automatically guarantee best execution.

Thomson Reuters announced earlier this month it had introduced RBOR to its REDI execution management system, enabling traders to set rules that determine which trades should be handled automatically rather than through manual intervention.

The most common use case involves dealing desks that process a large number of orders per day, many of which represent a small percentage of average daily volume, explains Michael Rude, the firm’s head of ETI trading.

“The dealing desk cannot add material value to these small orders and is best served by automatically routing these small orders to broker algos and staging the hard orders for the desk to manage manually,” he says.

“We have seen cases where dealing desks can take on additional mandates – such as a new asset class – due to the efficiencies that rules-based order routing brings.”

James Cusack, global head of sales at Caplin Systems, agrees that most banks will use RBOR for soft flow while the more challenging flow is still managed in some sort of book.

Brad Bailey 2016 2-160x186

Brad Bailey, Celent

There are several reasons why traders would want to set order routing rules, notes Brad Bailey, research director with Celent’s capital markets division.