Damon Kovelsky Senior Analyst at Financial Insights
Damon Kovelsky Senior Analyst at Financial Insights

Leader – Cross-asset class trading: automation becoming a viable possibility

Damon Kovelsky outlines how automating cross-asset class trading has now become a viable possibility and looks at what demand there’s likely to be for it.

The growth of cross-border equities trading during the past decade (see Figure 1) below, along with the automation of securities trading among many asset classes, has made automating cross-asset class trading a viable possibility. Automated cross asset class trading would allow, for example, an equity trader to automatically hedge their FX exposure of a cross border trade (we will call this FX-equity trading). Thereby locking-in currency prices at the time of equity execution. This may provide traders with a less expensive alternative to their banks. Technologically, we are al-most there. However, is demand sufficient enough for the majority of participants to dedicate resources and time to support automated cross-asset class trading?Figure 1. Growth of Cross Border Trading Source: SIA, 2004The standard approach to cross-border trading is decoupling the equities and FX trades. For many firms, this involves aggregating their FX exposures at the end of day and sending it to their bank or prime broker. This...continued

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