Home Forums Algos Algos Benefits, Considerations, Inhibitors

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    • #1391
      Sally Green

      I would be interested to hear what algo providers Finance Hive members recommend? And also how other members approach selecting which providers to work with?

      • #1394
        Jack Haddon

        We are currently analyzing the responses to a survey on buy side FX Algo selection criteria. Will be keeping this forum updated with results as they come in and look forward to hearing everyone’s thoughts!

    • #1334

      The Future of Algos:
      – There was a variety in the level of adoption of algos amongst the group, however it was clear that members who aren’t using algos yet are having to seriously consider increasing their usage.
      – The shock of Covid has pushed many towards increasing their algo trading usage and members agree this momentum will continue moving forward.

    • #1333

      Algos Inhibitors:
      – Issues arise when you are intervening in trades- as you can then alter the standardisation of the data sets to help demonstrate best execution.
      – There are 4 types of algo in the FX space that can be categorised- TWAP, VWAP, implementation shortfall and passive algos. Difficult when looking at comparisons to historical workflows.
      – You need big data sets to come to any conclusion of whether an algo is better than another.
      – Banks need to clearly differentiate between algos and their execution paths. That way you can have greater knowledge of what you are getting buy-in for.

    • #1332

      Algo selection:
      – Top considerations
      – Flexibility for intervention
      – Access to liquidity
      – Performance and comparability.
      – Servicing – communication with providers

    • #1331

      Algos Considerations:
      – The hardest consideration is being able to get a sufficient amount of data to build an effective comparison between risk transfer and an algo. Especially when you can’t trade the exact same trade to analyse.
      – By looking at the benchmark for the fixed rate, you can then weight the average on that benchmark.
      – Human intervention is key to be able to manage control of the trade when beginning your journey.
      – Other roadblocks are around information leakage and market impact.
      – You have to do your due diligence and build relationships with your providers.
      – We all have obligations under best execution to show continuous improvement and innovation. Algos, are therefore another tool in the tool kit.
      – Do not view algos as black boxes.
      – You need to make a responsible assessment for your chance of success.
      – In order to gather effective data, you need to make your algos comparable to each other.

    • #1330

      Algos Benefits:
      – Algos can be used to split into smaller trades to help reduce market impact.
      – You need to have the objective of the trades defined in order for the algos to be as effective as possible.
      – There is room to be doing a lot more with algos.
      – Algo wheels are a simple solution to build up clear data sets.
      – Algos can free up trader time to concentrate on alpha-generating tasks away from the G4.

    • #1326
      The Finance Hive

      Read the discussions and comments from the Finance Hive Community and post a question to get your answers!

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