Nicholas Pratt
Nicholas Pratt

Liquidity Aggregation - opening the way to business success in FX

Liquidity aggregation has been an increasingly prominent feature of the FX market in recent years, to the extent that a general consensus has emerged among traders that aggregation services can not only alleviate the visual burden of trying to watch five screens simultaneously but also have a positive impact on the quality of trade execution – something that has been extolled by the providers of these services for some time now, as Nicholas Pratt discovers.

FX Aggregation is simply the process of consolidating multiple heterogeneous liquidity sources and then exposing them as a single logical endpoint for execution,” says Peter Atkinson, head of FX product management at SmartTrade. “By far the biggest advantage this gives the trader is the ability for the machine to intermediate trading decisions with the markets. It makes it possible to build sophisticated order routing strategies that can make high speed decisions about where and when to route orders based on prevailing published liquidity.”  “Aggregation makes it possible to systematically rank liquidity providers by price in order to route to the best available price,” says Atkinson. “It also makes it simpler for the trader or machine to find more prices and deeper liquidity by aggregating more venues. Price may not always be the only determining factor on where it is best to route an order. Other considerations should include fill probability as well as the need...continued

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