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FX algo trading hits new heights

Francois Lamy
Francois Lamy
Strategy Director, FXall

FX algo trading continues to gain momentum, with its adoption on Refinitiv FXall up 41 percent in Q2. Find out why it’s not just asset managers driving this growth, with corporate treasurers also seeing ways to enhance their currency hedging.


  1. FX algo trading as a percentage of FX spot volumes is now at 20 percent, with adoption of execution algorithms on Refinitiv FXall up 41 percent in the second quarter.
  2. The benefits for buy-side market participants are significant as FX algos can help them achieve their best execution objectives.
  3. Corporate treasurers can benefit from passive algo execution in order to capture spread.

Continuing a long and steady rise, algo trading in foreign exchange now accounts for approximately 20 percent of total spot volume in 2019, according to various sources.

Market participants on the buy-side are increasingly using bank-provided algos, attracted by their potential benefits, including:

  • The potential to generate cost savings by minimizing spreads paid.
  • The potential to reduce market impact (especially for larger trades) through the stealthy placement of orders across several trading venues.
  • Their ability to analyze large amounts of data in order to conduct price discovery and identify optimal liquidity across a wide range of liquidity pools.
  • Trading desk operational efficiencies that result from automating the execution of trades.
  • Transparency and audit trails including execution prices and timestamps for each algo fill.

Algo trading on FXall

In their search for more transparency and best execution, buy-side institutions have now largely moved to electronic trading platforms where they can access a wide range of advanced execution tools to help them access liquidity in smarter ways.

The growing availability of bank-provided algos on these electronic trading platforms has greatly benefited the buy-side, providing market participants with a cost-effective way to access a large number of sophisticated execution strategies.

Refinitiv FXall, the leading provider of workflow and execution solutions for buy-side FX trading, has seen adoption of algos increase by 41 percent year-over-year in Q2 2019.

As the industry seeks smarter ways to trade and minimize transactions costs, buy-side traders are folding algos into their menu of execution options, alongside more traditional methods such as multi-dealer request-for-quote and bilateral streams of executable prices.

Benefits of algorithm execution orders. FX algo trading hits new heights.

Growing interest from corporates

While the greater part of algo trading volume is still generated by large asset managers, recent growth in algo adoption has also come from large multinational corporations whose treasury departments have substantial FX hedging needs.

Asset managers are typically among the early adopters of innovative trading technology.

Their early interest in algo trading was due to various factors, including competitive forces in the asset management industry driving them to explore new ways to improve their trading performance and lower transaction costs.

Regulatory requirements are also driving these institutions’ focus on best execution. Under the MiFID II European directive for example, best execution requirements mandate investment firms to take all sufficient steps to obtain the best possible result for their clients.

While corporate traders are not subject to these regulatory requirements, they are increasingly incorporating algos into their trading workflow as the industry as a whole becomes more familiar with these advanced execution strategies.

Algo providers themselves are also targeting the corporate segment with their marketing and education efforts. On the FXall platform, algo trading volumes by corporates increased by 56 percent year-over-year in Q2 2019.

Francois Lamy Quote.

Corporates can benefit from passive algo execution

Corporate treasurers across a range of industries (from pharmaceutical groups, to automotive manufacturers, and technology companies) are becoming more comfortable relying on algos in certain situations.

Depending on their trading objectives, they can justify paying banks a fee for access to their algos, as opposed to resorting to traditional risk-transfer trades where banks bear execution risk and are remunerated off the bid-offer spread.

While active traders focus on alpha-generation, often have a high urgency to complete their trades, and may privilege more aggressive algo execution that seeks to source liquidity as quickly as possible, corporate treasurers with predictable currency hedging needs can benefit from more passive algo execution, which will seek to break up the trade into several child orders that are executed over time and seek to capture spread.

This passive execution style can generate cost savings through lower spreads.

FX algo trading hits new heights.

More control over execution

Committed to providing users with unparalleled choice in execution tools, including advanced algo trading workflow, FXall has released the following enhancements in 2019:

  • The ability for users to slice algo tickets into several child orders, giving them more flexibility to work large tickets over time in order to minimize market impact and information leakage.
  • The ability for users to pause the execution of an algo, giving them more control over execution while they monitor market conditions and amend the algo’s execution parameters, if needed, before either resuming or canceling the algo’s execution.

By leveraging FXall’s market-leading connectivity to 22 bank algo providers and over 150 algos, these institutions benefit from pre- and post-trade workflow, as well as a single interface and user experience across all 22 algo providers.

Submitting and algo order on FXall.

In addition, FXall’s Trade Performance Analytics includes a growing range of analytics and performance metrics to help users assess the quality of their algo execution in a consistent way across providers.

Discover how to make smarter, faster, and safer trading decisions with FXall electronic trading platform

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