Nicholas Pratt
Nicholas Pratt

FX Algos - the smartest new kids on the block?

The world of FX algorithmic trading continues to develop on all fronts. On a technical level the algos are increasingly sophisticated as developers bid to match the market’s appetite for lower latency, better performance and more complex trading strategies. And on a commercial level, providers continue to offer new algo trading services. Nicholas Pratt canvasses a leading technology vendor and two leading FX banks to see what we can expect to see in the algorithmic FX trading space during 2012.

In 2012 regulation is set to be more influential in the FX market than has previously been the case. The continuing reform of the over the counter (OTC) derivatives market and the emergence of swaps execution facilities (SEFs) is likely to lead to a sizeable increase in algorithmic trading. And the FX market is likely to feature in firm’s algorithmically-driven multi-asset trading strategies. This last development invites comparisons between the algos developed for equities trading and those developed for the FX market. There are clear similarities, as can be seen by the commercial success of algo trading services that started off in the equities world and have been subsequently repackaged for the FX market. And given the relative complexities of the FX market structure, we may even reach a point where FX algos actually overtake those in the equities world in the way that they add precision to the equities marketplace. Progress Software does not directly develop FX algorithms but provides the tools...continued

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