Conference Dailys TRADETech FX Daily 2018 | Page 13

THETRADETECHFX DA I LY
interview
What is the current state of algo trading with-
in FX markets?
Andreas Anschperger: Algo trading is an addi-
tional service provided to portfolio managers
and clients, which is done on various asset
classes and markets, including FX. The key
task for traders is to guarantee best execu-
tion as stated in their best execution policies,
which should be firmly embedded in global
trading policies at larger firms such as Allianz
Global Investors.
FX algos are nowadays used by experienced
traders who enter the space after consid-
ering other asset class movements, overlay
manager and analysts considerations, as well
as process-driven hurdles. This combination
of experience and skill can enable traders to
support the day-to-day challenges of best
execution and all related tasks.
At Allianz Global Investors we have close
interaction with our risk, compliance and
legal teams in order to be ahead of the curve
regarding regulatory and risk boundaries,
such as new MiFID II requirements or the
FX Global Code of Conduct. The holistic
understanding of the challenges and interests
of portfolio managers and their envisaged
strategies is a key proponent to adding value
from the trading and execution side.
Advanced, systematic machine-run FX
algorithmic execution is a comparatively
new method of execution in the FX arena.
However, “human algorithms”, which refer
to the sole trader or portfolio manager’s skill
in executing orders related to underlying as-
set execution cycles or strategies, as well as
market liquidity, have to be considered too.
These more pre-analytical checks will al-
ways be the starting point for machine-driv-
en execution.
“The functionality of
algorithms should be
simultaneously advanced,
flexible and intuitive as
possible, but will always
be under revision and a
work in progress.“
Where do you see the need for improvement
and what can be done to make this happen?
AA: The usage of proven, easy-to-handle or
even custom made default set-ups is key to us.
The functionality of algorithms should be si-
multaneously advanced, flexible and intuitive
as possible, but will always be under revision
and a work in progress.
Simple algorithms usually executed in a
short period of time, due to the nature of our
business, is currently the norm. TWAP and
its derivatives in various shades of time and
aggressiveness currently play the key role for
this. No execution demand will always follow
the same pattern, nor does the style of an
algorithm. Therefore there is a constant need
for dialogue and intelligent adjustments, as
well as the related tracking. The key elements
which are taken into account are risk transfer,
best price (last look) , lowest spread, lowest
market impact, safe execution and settle-
ment, plus transparent and timely execution
reports. Thiis ideally accomp anied with an
independent post- and pre-trade transac-
tion-cost analysis (TCA).
What kind of work is Allianz GI doing around
artificial intelligence and machine learning in
this space?
AA: At Allianz Global Investors we have
close interaction with our service providers
who need to be able to digest the data sets,
complex rules and guidelines given to them.
This is accompanied and supported by in-
house teams which provide solutions and IT
structures, which are an integral part of our
trading operations.
How has FX algo trading been effected by the
introduction of MiFID II?
AA: In a MiFID II environment asset manag-
ers need to take an even closer and systematic
look at their best execution principles. Trade
compliance departments are highly alert and
setting standards for widespread and sys-
tematic access to markets and liquidity, and
the optimisation of smart order placement.
Execution quality considering risk transfer
and fill probabilities, market impact and ano-
nymity serve as key elements for this. Conse-
quently, algorithmic trading is representing
a prominent additional execution layer next
to the standard market, limit or benchmark
execution.
What are you hoping to take away from Trade-
TechFX this year?
AA: From my perspective, TradeTechFX
Barcelona has a high attention rate not least
based on the good experience and interaction
from last year. As FX markets have strongly
attracted more attention and momentum,
driven by MiFID II being introduced and ex-
perienced, increased market volatility, global
political events and shocks, market players
need to stay ahead of the curve of develop-
ments. TradeTech FX forms the perfect basis
for buy-side-to-buy-side, buy-side-to-sell-
side, and vendors for intense discussions to
find smarter ways to enhance the business
and to build new networks.
Which sessions are you looking forward to at
the event and why?
AA: First of all I’m very much looking for-
ward to the panel discussion “Next genera-
tion algos – how are algorithmic processes
being improved by the use of machine
learning and advanced technology?” in which
I have the honour to take part in.
Apart from that I’m looking forward to the
agenda items that focus on the post-MiFID II
world, how to make best use of pre- and post-
trade analytics, and discussions around the
updated FX Global Code of Conduct.
The official newspaper of TradeTech FX Europe 2018
TheTradeNews.com
13