If I were a cynic I would raise a quizzical eyebrow at the timing of the CFTC’s announcement on Friday that it has proposed “supplements” to some of the detail around RegAT. This rule has raised significant controversy over what seemed to be a proposal to have source code stored with the CFTC, but, according to CFTC, apparently it was all a misunderstanding! A cynic would also ask why something that is "misunderstood" needs rewriting of course, but I'm sure we're above that...
FastMatch has made its proprietary algorithmic and transaction cost analysis (TCA) services available to all its subscribers.
The firm has been offering algorithmic trading to asset managers via its AgencyFX product for the past 18 months to satisfy increasing demand from this customer segment for algorithmic execution products.
Now it will be offering it to both buy and sell side users of the platform. Clients using FastMatch algorithms will receive automated TCA reports upon completion of their orders showing the algorithmic execution performance versus arrival price, FastMatch midpoint and other benchmarks.
A new survey released by JP Morgan, which almost 200 institutional FX traders took part in at the end of last year, shows that although just 12% of respondents currently use algorithms for trading, 38% plan to increase algo usage in 2017.
This, in and of itself is not necessarily a surprising statistic. Numerous market commentators have been predicting for a few years now that more institutional FX trades will employ algorithms for a variety of reasons. These include navigating an increasingly fragmented liquidity landscape, helping firms to minimise their market impact, providing a more auditable trading record, and potentially enabling buy side firms to take on more risk themselves as some banks drift towards a more agency-focused business model.
A new study from Greenwich Associates suggests that FX dealers are narrowing their focus in terms of which products and clients they will cover.
For the study, Greenwich says that it conducted interviews with 2,393 corporate and financial users of foreign exchange around the world about market trends and their relationships with their dealers.
The results showed that, for the second consecutive year, significant market share was redistributed among the dealers in the top ranks of the FX market in 2016, with some leading dealers adding as much as two full percentage points in market share and others ceding similar amounts.
Pragma Securities has expanded its algorithmic trading platform, Pragma360, to include NDF products.
While the latest Bank for International Settlements (BIS) survey in 2016 showed that spot FX trading was down 19% compared to three years previous, it also showed that the NDF market grew by 5.3% over the same time period.
The growth of the NDF market, as well as the fact that these products increasingly trade electronically, is what prompted Pragma to start offering algorithmic tools for trading them, Curtis Pfeiffer, chief business officer at Pragma, tells Profit & Loss.
In a speech on Friday, Chris Salmon, executive director, Markets, at the Bank of England, discussed the changing market microstructure, in particular the advent of “fast markets” and stressed it was “incumbent” upon authorities to keep up.
Salmon highlighted three recent flash events in financial markets, the equities market flash crash of 2010, the US Treasuries flash rally in 2014 and last year’s Cable flash crash and while he observed that sharp moves in asset prices are nothing new, “the speed, and the typical near-total reversal” is new.
Justin Slaughter, a partner at Mercury Strategies, warns that US regulators are examining if they need to take further action around algorithmic trading.
Talking about how the Commodity Futures Trading Commission (CFTC) has not necessarily given up on “Reg AT”, which included a controversial provision that trading firms hand over potentially proprietary source code related to trading to the regulator, Slaughter highlighted broader questions about what data regulators should have access to.
“What should the government do to make sure that we have access in an emergency to critical data but not give it so much access that we’re then in danger of leaking our critical proprietary knowledge?” he says.
Automation is important in markets, it brings valuable efficiencies and helps the financial markets industry advance – it’s what keeps us moving forward. It is not, however, the be all and end all, and while the FX spot market largely exists in an automated environment, firms should not be fooled into thinking they don't need well-qualified and astute humans in key roles – one of them spot trading - for the latter role in particular, provides a crucial sanity check.
BNP Paribas has seen a raft of departures from it’s FX algo team over the past few months.
Profit & Loss understands that in London Silviu Vlasceanu, a senior quantitative analyst, Farzana Nanji, who worked in FX automated client execution, Tom Appleton, the head of FX algo execution, Ismail Zekhnini, an e-FX algo trader and Shameer Subedar, who worked within the e-FX algo team developing agency based algos, have all left the bank. In addition, sources indicate that in Singapore, Ashvin Parkash, head of e-distribution for Asia who was part of the same team, has also left BNP Paribas.
DeVere Group has founded the DeVere Digital Asset Funds, something it says is “a suite” of digital currency solutions for experienced investors, in association with Dalma Capital Management, a hedge fund manager in the Dubai International Financial Centre. The firm has revealed that its strategy will be largely arbitrage-based, as it has identified "durable inefficiencies" across trading venues in cryptocurrency markets that it can exploit using algorithmic trading.
The launch was announced the day after Bitcoin reached its 10th anniversary.
Ian Daniels, executive director, head of e-FX distribution, EMEA, at Nomura, talks about algorithmic trading trends in the FX market.
Profit & Loss: Since you joined Nomura, you’ve been working on developing the bank’s algo offering, what are the latest developments there?
Ian Daniels: Our algos are now live on Bloomberg and will soon be live on a number of other major third party venues. I think that one of the benefits of being a later entrant into this space is that you have the experience of previous roll-outs to draw upon. So we knew that access to liquidity and the customisability of our algos would be important characteristics for our clients and that’s why we created algos that enable clients to execute in a default mode or that can be tailored to meet their specific needs.