Foreign exchange
The majority of buy-side traders in FX continue to primarily rely
on brokers; however, there are some participants present in
the market that began trading electronically in FX as early
as 2002. These pioneers are a small minority, but nevertheless
there is at least one European asset manager using algos
in FX for all trades above
50 million Euros in size.
K&KGC Buy-side research
indicates that the majority
of buy-side firms have not
yet adopted FX trading
algorithms. Some firms do
use electronic venues such
as FXall and others.
As with other asset classes,
there are those on the buy
side who argue that the
path to the future involves
more buy-side to buy-side
trading, with the buy side
increasingly
becoming
price makers instead of
price takers.
However, proponents of
this view accept that there would need to be a change
in mentality on the buy side before the full benefits can be
realised.
One of the major challenges for traders in all asset classes
in Europe and worldwide
is the need to adapt to
new regulation, including
but not limited to MiFID II,
Basel III and EMIR as well as
Dodd-Frank in the US and
local initiatives in individual
countries.
In Europe, much of the
European
Commission’s
efforts in recent years have
been focused on improving
transparency. Yet despite
this push, one of the most
critical components of a
transparent market – the
creation of a consolidated
tape – has not been
achieved.