Sebastian Hofmann-Werther

FX Automation: Pushing Boundaries

May 2023 in Expert Opinions

Sebastian Hofmann-Werther, Head of EMEA at 360T, teases out some of the nuances associated with automated trading solutions in FX.

In the FX industry people often talk about “the buy-side” as a collective group when in fact there is a huge degree of diversity within this segment of the marketplace — both in terms of the structure and operations of these firms as well as their execution methods and objectives.

However, over the past few years we’ve observed one trend that remains consistent across this heterogenous group of firms called the buy-side, and that’s the strong desire to automate more of their FX activity utilising execution management systems (EMS). But because these firms are all different, so too are their automation priorities.

For example, a very large asset manager trading on behalf of thousands of funds might focus on ways to automatically net off positions between them all in order to reduce the overall amount of FX they have to trade, and thus reduce costs.

By contrast, a key goal for an institutional investment manager trading international equities might be to minimise the amount of time between their equity transaction and the FX trade necessary to facilitate it, in which case automating the latter can help achieve this. A hedge fund in the US might need to trade Asian currency pairs, but if it has no overnight desk then it might be forced to trade in hours when those pairs are less liquid. Using a set of completely customisable parameters this hedge fund could instead auto-execute these trades at a time when liquidity conditions are much more favourable in order to improve the pricing available.

A corporate treasurer, meanwhile, might look to automate parts or all of their FX workflows in order to reduce the amount of manual processing on the desk, freeing up staff to focus on other more mission-critical activities and minimising the operational risks associated with these processes. Often there are concerns that the increased automation of FX execution will negatively impact treasurers’ relationships with their bank partners. But contrary to this, the time which the treasurers save on manual execution processes opens up more room for strategic dialogue with the banks.

Suffice to say, the specific use cases and benefits of this technology are myriad, but an overarching theme amongst every firm that we speak to is that they are looking for ways to increase productivity and drive new efficiencies on the trading desk, and automation is one way of doing this.


Not all FX automation solutions are built equal though. At 360T we believe that one differentiating factor between them is the level of granularity available in the rules-based structure of these tools.

We think that having automation occur based purely on factors like the notional size of a trade and the currency pairs involved can be a blunt instrument. That is why the parameters within our EMS are completely bespoke, and can include a broad range of considerations such as the level of liquidity in the market, what percentage of a bank basket is quoting, how quickly quotes are being supplied, whether trades should be staggered as they go out to market, etc.

And all of these can be applied to individual funds within an underlying account. This allows traders to instead automate their FX activity with scalpel-like precision.

Data is, of course, another hugely important differentiator. 360T’s award-winning market data feeds are integrated into our EMS, enabling users to deploy them as a tolerance check when auto-executing trades so they can be certain that no trades will occur further than a pre-defined distance from the market midpoint.

The benefits of this are particularly acute when it comes to trading non-Spot FX instruments. This is because Spot FX market data is, generally speaking, a commoditised product that is widely available. This was evidenced in a recent survey that we conducted at buy-side conference TradeTech FX USA 2023 in which 50% of respondents said that the biggest gap in their market data sets was FX Forwards, 29% said it was in NDFs, 18% said FX Options and no one said that it was in Spot FX.

At 360T we’re helping to address this gap with the Swaps Data Feed (SDF), a truly unique product, developed in partnership with DIGITEC, which is directly integrated into the pricing engines of over 20 top FX banks, offering full granularity across the curve from O/N out to two years in over 40 pairs (also including granular pricing around broken and special dates) and providing real-time market data in an unlimited number of crosses in G10, LM and non-deliverable currency pairs.

By leveraging the 360T EMS and the SDF, buy-side firms are able to streamline their FX operations and enable traders to focus on the most time consuming or complex tasks on the desk while simultaneously ensuring that all of their trades are auto-executing close to the market midpoint.

Continuous innovation

It’s also important to recognise that when it comes to automation, buy-side requirements are constantly evolving, and so the technology solutions available to them need to as well. That is why 360T is committed to conducting three new technology releases each year, to ensure that all our products — and especially our EMS — develop alongside our clients needs and remain at the cutting-edge of the FX industry.

Some of our latest and upcoming releases exemplify this, and how we are helping buy-side firms to further automate their FX trading activity across different types of workflows.

For instance, we have introduced a new functionality which enables firms using the 360T EMS to put cross-currency mixed given portfolios into competition. They can receive automated-pricing from their counterparties and enjoy full post-trade straight-through-processing (STP) whilst also eliminating some of the “clean-up trades” often associated with these portfolios.

In addition, the Forward First Fixing functionality added to the EMS enables users to automatically put banks into competition for the forward points of their benchmark orders, potentially leading to improved pricing on these trades.

Looking ahead, we will shortly be introducing the ability for buy-side firms to access EFPs (exchange for physical) and FX Futures within the streamlined workflow of our EMS, allowing them to maximise the benefits of both the listed and OTC marketplaces through one platform.

Another area where 360T continues to innovate is around pre-trade transaction cost analysis (TCA), which has been a hot topic amongst buy-side firms recently. We are about to launch advanced pre-trade TCA tools into our EMS so that buy-side firms can automatically get additional information that will help them react to factors like market volatility and depth ahead of execution, helping them to more effectively achieve their trading objectives.

The major trend

Automation in all its various guises continues to be a major trend — and arguably the major trend — amongst buy-side firms trading FX.

Therefore, we believe that as a technology partner to this highly diverse group it is vitally important to offer a differentiated technology solution which can deliver tangible and quantifiable benefits to the users.

In addition, we need to keep pushing boundaries, investing in new innovations which can allow buy-side firms to automate different elements of their workflows and trading.