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.
Galen Stops digs a little deeper into the results of the recent JP Morgan e-trading survey and finds some surprising statistics.
For those of you who missed it, there were some noteworthy nuggets of data contained within JP Morgan’s recent e-trends survey. But digging a little deeper beyond the headline figures reveals some even more interesting trends emerging in the FX market.
The first thing to point out is that the survey raises some curious questions about algo usage amongst clients. On the surface, it presents good news for algo providers – although only 8% of respondents said that they currently use algos for execution, 24% said that they plan to increase their usage of them in 2018.