While pricing more thinly traded currencies or emerging markets may be challenging, traders can now insist on certain measures in order to better understand the quality of their executions. Sean Hefkey offers some timely suggestions.
The challenges of creating algorithms for FX trading are many, with no central limit order book, depth of book or volume information to draw upon. Firms are using new market microstructure knowledge and market data to move away from the historically manual FX processes to more automated, anonymous electronic trading.
In the historically unregulated FX marketplace, trading practices have carried on in the same fashion for many decades, with a few major dealers dominating. By its very nature, FX trading transcends borders and therefore, has not come under the regulatory scrutiny that other asset classes have.
The benefits of multi-asset system are undeniable—reduced possibility for data entry error, consolidated compliance, enterprise-wide risk management, and standard benchmarking for trading—not to mention seamless integration of data and workflow.
ITG experts argue that the implementation of fair value pricing across the financial industry would be expedited and simplified if public benchmark providers were to produce fair-value adjusted indexes.
