[ T R A D E T E C H
F X
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BUY-SIDE URGED TO
BETTER UNDERSTAND
UNDERLYING LIQUIDITY IN
FX ALGOS
PANELLISTS AGREED THAT THE BUY-SIDE HAS A
BETTER GRASP ON HOW ALGOS OPERATE, BUT LESS
SO ABOUT THE UNDERLYING LIQUIDITY.
will be competing in the algo space
and will have to differentiate them-
selves in terms of execution quality.
As a liquidity provider, we want to
be measured since we are confi-
dent in our quality of execution.”
Conference delegates were polled
on the different factors taken into
account when measuring liquidi-
ty, with a majority of 45% stating
that market impact was the most
important factor, followed by bid/
offer spread which 39% of the au-
dience said was most important.
“As we can see from the poll,
market impact is also a big deal,”
Asif Razaq, global head of FX auto-
mated execution, BNP Paribas, told
delegates. “You can have a conver-
sation with a liquidity provider and
ask what is the liquidity behind the
“Moving forward, the
buy-side needs to
understand the types
of liquidity those algos
are seeking, because
aggressive liquidity
seeking algos are very
different from passive
liquidity seeking algos.”
KEVIN KIMMEL, CITADEL SECURITIES
I
nstitutional investors have been
urged to gain a better under-
standing of the underlying liquidity
in FX algorithms by major market
makers and sell-side institutions.
Panellists from Citadel Securities,
XTX Markets, BNP Paribas and
Jefferies agreed that the buy-side
now has a good understanding of
how algorithms in FX work, but
need to focus on the underlying
liquidity behind the algos.
“The buy-side themselves, I
26 // TheTrade // Spring 2019
would say, have a firm grasp on
how algorithms operate, but less of
an understanding about the under-
lying liquidity. Moving forward, the
buy-side needs to understand the
types of liquidity those algos are
seeking, because aggressive liquid-
ity seeking algos are very different
from passive liquidity seeking
algos,” said Kevin Kimmel, global
head of eFX at Citadel Securities.
“It’s a conversation between the
buy-side and the banks, and banks
algo, what the market impact is,
and for the sell-side to be flexible
and willing to make changes, con-
stantly changing liquidity profiles
for the client, is also important.”
At TradeTech FX in Europe in
September, a panel of buy- and sell-
side market participants agreed
that transaction cost analysis
(TCA) on FX algos has proven to
be a useful tool for asset managers
seeking a better understanding on
algo performance.