Preparing for Stress: What FX Automation Really Has to Deliver When Markets Shake

In our latest Industry voice article, Tibor Gergely, head of e-FX liquidity at Commerzbank, takes a look at the role e-FX models will play in a persistently uncertain environment

FX has entered a period where everything can move at once: less certain central‑bank paths, elevated geopolitical risk and liquidity that looks very different from five years ago. At the same time, technology, market structure and client expectations are shifting quickly.

In that environment, automation cannot just mean going faster. It has to keep you controlled, transparent and resilient. Recent episodes have reinforced a key point: FX spot has shown automation‑driven resilience, with markets absorbing geopolitical shocks in an orderly way. That reflects years of investment in robust electronic infrastructure, data and human oversight.

Quiet markets can hide fragile workflows. When volatility rises, liquidity fragments, spreads widen, correlations break and client behaviour shifts. That is when you learn whether automation is robust or brittle. The firms that cope best build around explainability, smarter connectivity, deeper electronification beyond spot and upgraded – rather than sidelined – human oversight.

Automation Has to Be Explainable

Innovation remains central to electronic FX: third‑party analytics, AI‑driven tools and more advanced execution logic can improve outcomes, but sophisticated logic that cannot be understood in real time becomes a liability when markets come under stress.

If a pricing engine widens spreads, skews risk, reroutes flow or rejects requests, users need to know why. Traders and sales cannot be left guessing what the system is doing at the moment they need to act.

Explainable automation means clear visibility of:

• Which controls are active, what thresholds have been hit, and why
• How liquidity and venue performance are changing by pair, tenor and channel
• Where client flow is concentrated or behaving abnormally versus “normal” patterns

Good automation reduces uncertainty; poor automation adds a second layer of uncertainty on top of the market. Explainability is not just governance – it is a trading requirement. In a fast tape there is no time to reverse‑engineer a black box, and once users cannot explain behaviour to clients, the instinct is to switch automation off precisely when it should help most.

The test for swaps and NDFs is not whether these products trade electronically on a normal day, but whether workflows hold up when volumes spike and liquidity becomes selective

Once you can explain what systems are doing, the next question is where and how they execute – bringing you to the reality of a fragmented FX market.

Fragmentation Demands Smarter Connectivity

Clients now interact through multi‑dealer and single‑dealer platforms, direct APIs, RFQ channels and, in some areas, voice or hybrid workflows. Choice is healthy, but fragmentation creates drag: each venue often brings its own protocol, onboarding, legal and credit setup, and user experience. The result is a patchwork where clients “pick and choose” across silos rather than accessing liquidity through a coherent framework.

When volatility rises, that complexity becomes more expensive – in basis points, operational bandwidth and risk. Resilient workflows increasingly depend on:

• High‑quality aggregation across venues and channels
• Smart routing that understands venue characteristics, not just best price
• Modular APIs and consistent standards that allow workflows to be reconfigured quickly
• End‑to‑end integration from pre‑trade analytics through post‑trade processing

The goal is not connectivity for its own sake, but simpler access to real liquidity when conditions are difficult and the cost of friction is highest. This matters even more beyond spot, where workflows remain fragmented and manual—and stress is far harder to manage without robust automation.

Swaps and NDFs Need More Than Cosmetic Electronification

Spot FX is highly electronic; forwards, swaps and NDFs are not yet at the same level. Many workflows remain manual, semi‑electronic or hybrid, adding latency, operational risk and avoidable errors – exactly what you do not want when markets are stressed.

Electronification is accelerating, but simply putting RFQs on a screen is not enough. “Cosmetic” changes will not deliver resilience. Real progress should include:

• Deeper electronic RFQ and, where appropriate, high‑quality streaming
• Automated credit and risk checks, supported by more standardised documentation where feasible
• Faster, more reliable confirmation and settlement workflows
• Processes explicitly tested under stress conditions and thinner liquidity

The test is not whether these products trade electronically on a normal day, but whether workflows hold up when volumes spike and liquidity becomes selective. When that happens, the market still leans on human experience — which brings us to the role of people.

Human Oversight Still Matters – and Should Be Upgraded

Automation should not remove judgement; it should sharpen it. In fast markets, experienced people should not be hand‑keying tickets or reconciling multiple screens. Their value is reading risk, understanding client needs, interpreting liquidity and handling exceptions.

The best systems surface the signals that matter and suppress the noise, for example:

• Unexpected inventory accumulation and unusual client demand by pair, tenor, region or client type
• Deterioration in fill quality, spikes in rejects, or operational bottlenecks in the workflow
• Pricing dislocations between venues or channels

Automation should act as both filter and amplifier – filtering out low‑value noise and amplifying information that supports better decisions. Well‑designed automation makes human oversight more effective, not less necessary.

FX spot has shown automated markets can absorb shocks when built on explainable logic, robust connectivity and strong human oversight

Crucially, when failures happen you need to identify what broke – internal, external, or both – and recognise that serious incidents usually involve multiple breaks at once (for example, venue issues plus internal credit limits, or pricing logic plus data feeds). Robust monitoring should diagnose this quickly, so the right fix is applied without shutting down the whole electronic franchise. Clear component ownership, intelligent alerting and rehearsed playbooks are part of that preparation.

This partnership between systems and people is also where performance measurement needs to evolve.

A Better Way to Measure Performance

Success in electronic FX is often judged by familiar metrics: tighter spreads, lower costs, higher electronic ratios, more auto‑hedging and more internalisation. All matter, but by themselves they do not tell you how the franchise behaves under stress.

A stronger test is: how did the workflow perform on the hardest day of the quarter? On that day:

• Did clients retain access to consistent liquidity, or did channels fail?
• Did controls behave predictably, or did they trigger in unexpected ways?
• Did traders and Sales trust what they were seeing on their screens?
• Was risk visible and manageable, or did it require manual heroics?
• Did the business stay composed, or did it spend the day firefighting infrastructure?

If most answers are “yes, it held up”, automation is adding resilience – not just efficiency. Framing performance this way forces different investment priorities: innovation remains crucial, but it must be grounded in robustness and the ability to navigate genuine stress.

Looking Ahead: Innovation Plus Resilience

The next chapter of electronic FX will be shaped by both innovation and resilience. Geopolitics, central‑bank surprises, sudden repricing and liquidity shocks are not edge cases – they are recurring features of this market.

FX spot has shown automated markets can absorb shocks when built on explainable logic, robust connectivity and strong human oversight. The firms that are truly prepared will not simply be the fastest; they will be the ones whose automation is:

• Transparent enough to be trusted
• Connected enough to find real liquidity across fragmented venues
• Robust enough to keep working when conditions are far from ideal

When markets shake, that combination – speed plus clarity, resilience and control – is what will really matter.