e-Forex Magazine | Retail e-FX Client | Picking up speed: Retail FX focuses on delivering low latency trade execution
Retail e-FX Client : Picking up speed: Retail FX focuses on delivering low latency trade execution
First Published in e-Forex Magazine January 2012
Nicholas Pratt
The demand for low latency trading has been a feature of the HFT equities markets for many years to the point where there is little room left to go in terms of seeking the quickest possible executions. Low latency has also become a feature of the institutional FX space and has been present for a number of years. More recently though there has been a growing demand for low latency execution from the retail FX trading space. Nicholas Pratt investigates why high frequency players are now increasingly interested in trading on retail FX platforms.
Three years ago, high frequency traders had little interest in FX retail platforms. As more and more features were added to online trading platforms, more 'hops' were added to the transaction chain and the execution process became increasingly slow. However, this is changing and there is now a clear demand among high frequency traders to use FX retail platforms and, consequently, platform providers are increasing their efforts to speed up access to pricing engines.
Stephen Leahy, president of Capital Markets Access Partners, says there are two reasons for this - regulation and short-term strategies. "Regulators are leaning towards STP executions by brokers so it becomes necessary that brokers can get the clients' orders out to the execution platforms and then back to the broker's platform quickly. Delayed executions and slippage can cause compliance issues. Also short term trading strategies are based on small movements in currency pairs so a fast execution that gets executed and confirmed quickly is a necessary part of that strategy. Short term strategy clients are of high value to brokerage firms so the brokers need to offer low latency ECN executions."
