THETRADETECHFX DAILY market review beneficial when dealing with high volumes to minimise market impact . “ I agree that the most significant advantage for us would be market transparency and lower trading expenses , as well as improved execution efficiency ,” she said .
“ However , I am surprised that gaining access to new liquidity comes in at the bottom of the list . That is most likely going to need some time since many market participants are not currently utilising it . Maybe it is in the difference between the deliverable currencies : a lot of small flows are going from very different counterparts and market participants , which is not exactly the same for NDFs .”
Infrastructure and market challenges According to Wenzler , there is also still some development necessary to make them even more accessible for buy-side firms . “ It is developing more slowly and there are fewer participants ,” she adds . “ The offering of the banks definitely has to improve . However , I think we have already made quite good progress in recent months .” Other barriers were identified by respondents , including need for “ more transparency ” in NDF algos , the lack of the necessary technology infrastructure to use NDF algos efficiently – including the necessary expertise to integrate the right environment – as well as the very fragmented nature of the NDF market itself . Other key challenges remain , such as broken dates or how to aggregate NDF liquidity into one system lot . As FX algo providers look to attract further adoption of NDF algo strategies , they will need to offer an increasingly sophisticated range of data analytics , algo execution tools and liquidity management in order to facilitate access to NDF markets and to overcome some of the barriers to entry cited by these firms . “ NDF trading is a complex process , but if these challenges can be overcome , it will provide FX traders with more opportunities for sourcing liquidity ,” the report concluded .
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