Meeting the demand for FX Algorithmic Trading
With Progress Software, Portware, LatentZero, Lava Trading, Orc
Software and FlexTrade.
With Dr John Bates, Vice President of
Apama Products, Progress Software, Lee Ratner, Global Head FX sales
at FlexTrade, Andrew Yao, Product Manager, Portware FX, Mark
Montgomery, Global Business Development Director at Latent Zero,
David Ogg, Chief Executive Officer, LavaFX and Peter Sibirzeff,
Managing Director of Orc Software in New York.
What factors are behind the spread of
Algorithmic trading from the equities market across to other asset
Bates: In general, the demand for
algorithmic trading is due to: Increased competition in the trading
space, requiring more innovative intra-day trading 1) The need for
low latency response to trading opportunities made available due to
market volume and volatility 2) The need to rapidly identify the
opportunities and execute the trading response quickly enough and
circumspectly enough to be opportunistic while masking ones
intentions 3) The availability of real-time market data and access
to liquidity through high speed APIs. In FX this includes banks
directly, as well as other liquidity pools, such as Hotspot and
Ratner: There are several main
factors. Traders are not seeing the same returns they used to see.
The spread opportunities in equities have really tightened over the
last few years, because of the continued uptake of algorithms.
Equities traders have begun to move over to FX in search of better
spread opportunities. This is driven both by the need to make more
of a profit in each securities class, as well as the need to settle
the increasing number of international trades with currency trades
at competitive rates. Also, the traditional international equities
traders, who have typically let their custodians trade for them,
are now under best execution guidance, and that is not something
their custodians will necessarily do for them. These traders are
taking the control of FX trading in-house.
Yao: The spread of algorithmic
trading to other asset classes is due in large part to the
increasing number of electronically tradeable markets. As more
markets become electronic, they become more efficient to trade and
associated trading costs go down. Any reasonably liquid market with
low transaction costs in terms of the spread and commissions lends
itself to be traded algorithmically. Typically, this will increase
the frequency of transactions in that market if the costs are low
enough. Trading those markets algorithmically enables a trader to
make more bets, thereby increasing their opportunity to win.
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