Nicholas Pratt
Nicholas Pratt

Technology and growth: key trends in e-FX for 2011

As a new year begins, thoughts inevitably turn to what the next 12 months will bring in terms of new developments, old practices, areas of growth and markets under threat. In this article Nicholas Pratt interviews some of the industry’s leading consultants to try and identify key focus areas that are likely to have a profound effect on the development of the electronic FX marketplace during 2011. Some of these address age-old issues that are common to every asset class, although with clearly different properties and stresses. Other developments are unique to the FX world and reflect the very distinct path that electronic foreign exchange is forging for itself.

Algorithmic FX trading Algorithmic FX trading is a growing area but, according to Sang Lee, consultant at Aite Group, much of the development in 2011 is likely to centre on the attitude to and adoption of algos rather than the technical minutiae. “In terms of execution algorithms, I expect to see banks more engaged in providing algorithms for their clients. FX is still lagging behind other asset classes. Those FX traders that have been using algos for some time have by now developed their own but banks are seeing more interest from the more traditional FX clients who are happy to take the algos offered by their banking partners. “For corporates, FX is more of a by-product of their cross-border transactions. They trade less but at specific times and up to now they have been willing to pay a few extra pips to get their trades done. But as the FX market becomes more competitive they are looking to be more efficient in their trading and are looking at algorithms but have no desire to develop...continued

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