Automation Around Manual FX Trades Priority for Buy Side: Survey

While the FX market has a reputation as one of the most-automated in the world, areas still require manual intervention, even voice, to execute, meaning, a new survey from Coalition Greenwich finds, the buy-side is seeking to further invest in its workflow technology.

The report, FX Trading: Strategic Importance of Electronification and Automation, states some obvious facts – best execution is a top strategic priority for the buy-side – it also states that automating trade execution is also seen as a key means of reducing risk, especially in those markets where trading is not conducive to e-trading.

“Despite the FX market’s reputation as being one of the world’s most digitised marketplaces, some trades are not conducive to electronic execution,” the firm says. “For example, a lack of liquidity and the buy-side’s preference for voice and chat may limit electronic execution when trading certain non-deliverable forwards (NDFs).”

Stephen Bruel, senior analyst on the market structure team at Coalition Greenwich and author of the report, add, “Not all executions can be automated, so the buy side is also looking for improved tools to optimise their execution when manual intervention is required, still hoping to ensure they are receiving competitive executions.”

The report also looks at the technologies and tools that help in the quest for best execution, noting these include the use of electronic execution venues, transaction cost analysis (TCA) and algorithms, which are “improving and now more commonly used”.

Looking ahead, nearly half the buy-side firms participating in a recent study from Coalition Greenwich named execution management and analytics as top priorities in technology investment strategies.
“The overarching goal is to optimise FX trading, and investing in automation and new analytical capabilities is critical to achieving that goal,” says Bruel. “Upgrading trading systems such as execution and order management systems, enhancing data acquisition and improving pre-trade analytics all support the broader goal of improving execution quality.”