Retail e-FX Client : Picking up speed: Retail FX focuses on delivering low latency trade
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
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