Tradefeedr Launches FX Algo Forecasting Suite
Posted by Colin Lambert. Last updated: February 20, 2023
Algorithmic execution has come of age in FX markets over the past few years, largely thanks to strategies being proven during the upheaval of the start of the pandemic and the multiple economic and macro events of the last year, but this growth has generated its own issues.
A natural reaction in the industry to the interest in algos has been a proliferation of firms offering execution strategies, from the third-party, pure agency, models, through to banks offering an increased number of models. There has also been a growth in banks especially offering white labelled versions of major players’ algos, meaning that the choice for users has never been so broad.
There is also the factor that algo execution strategies comes with a de facto disclaimer – the FX version of “past performance is no indicator of future returns”. Put simply, the data can look great, but is it firstly independently-derived (it is increasingly so it has to be said); and secondly how deep is the dataset?
With this environment as a background, FX data analytics platform Tradefeedr has launched its Algo Forecasting Suite, a collection of pre- and post-trade tools to help clients select the most appropriate algo for their trade. The product has been developed, refined and back-tested against Tradefeedr’s database and provides, the firm says, a mean global forecast that differs from the actual result by just 0.06 basis points.
The Algo Forecasting Suite offers expected algo behaviour, and the most suitable algo given market conditions, risk appetite, time, or audit constraints. In addition, it provides post-trade analytics compared to Tradefeedr forecasts, and the opportunity cost of not using alternative execution algos.
Initiall available via API or excel, thus allowing users to integrate into their own workflow, the suite will be added to the Tradefeedr dashboard in the coming weeks. Users enter their criteria and the suite offers the most suitable execution aggression given market conditions, risk appetite and time, combined with forecasts of expected individual algo behaviour based upon historical analysis.
“The Algo Forecasting Suite allows clients to access accurate and independent data to better inform their algo execution strategies, and to analyse performance after the trade,” says Tim Cartledge, chief data officer at Tradefeedr. “At the heart of the new service, we have developed the Tradefeedr Cost Of Liquidity Score, where we have pioneered a method of collapsing volatility, liquidity provider pricing, currency pair and time of day down to a single number. This allows us to analyse algo performance across significantly different markets and conditions to ensure that comparisons are made on a like for like basis.”