unfortunately this is behind a paywall... :(
Reading it is an FAQ:
https://h4labs.wordpress.com/2015/09/14/hacker-news-faq-1-ho...
Forex Scandal Drives Shift to Algo Trading
11–20 of 34 posts
Re: Forex Scandal Drives Shift to Algo Trading
#12I've written FX trading algos, and I don't think it's so much to do with the fixing scandal. For a long time now, FX has been a low margin business. It's just a guy on the end of a phone. Now they can't even use their one advantage, which is knowledge of flow, because of regulations about prop risk. So that guy on the phone, he's being replaced by a robot. At the end of the day, what does a market maker do? He provid…
I think you have to weight by trade size. If you didn't, I'd say 99.999% of all trades are algo.
Re: Forex Scandal Drives Shift to Algo Trading
#13I've written FX trading algos, and I don't think it's so much to do with the fixing scandal. For a long time now, FX has been a low margin business. It's just a guy on the end of a phone. Now they can't even use their one advantage, which is knowledge of flow, because of regulations about prop risk. So that guy on the phone, he's being replaced by a robot. At the end of the day, what does a market maker do? He provid…
I think you have to weight by trade size. If you didn't, I'd say 99.999% of all trades are algo.
Yes, but even by trade size, the 15% figure is suspect. Perhaps central bank intervention is done by mega-trade on phone. But even your huge hedge fund is going to be able to execute their B+ trade on an algo.
Re: Forex Scandal Drives Shift to Algo Trading
#14I worked for 5 years as a software engineer at a forex hedge fund, contributing to the development of their algorithmic trading system. This shift started long before the forex scandal broke. Many different financial markets are becoming increasingly automated, and banks are developing their own trading algorithms in order to keep up.
Re: Forex Scandal Drives Shift to Algo Trading
#15Forex Scandal Drives Shift to Algo Trading Banks are increasingly turning to computer programs to carry out foreign exchange trades After paying billions in fines to settle allegations that traders tried to rig a key currency benchmark, banks are increasingly turning to computer programs to carry out foreign exchange trades. In an industry traditionally dominated by human traders placing orders by phone, the rise of…
You really shouldn't do that. WSJ pays their journalists a lot of money to write these articles (and the finance ones are really good)
Or you can just google the URL. The WSJ paywall lets you through if referer is google.
http://google.com/search?q=http%3A%2F%2Fwww.wsj.com%2Farticl...
Re: Forex Scandal Drives Shift to Algo Trading
#16Full text: https://archive.is/lY4Yz
Re: Forex Scandal Drives Shift to Algo Trading
#17I've written FX trading algos, and I don't think it's so much to do with the fixing scandal. For a long time now, FX has been a low margin business. It's just a guy on the end of a phone. Now they can't even use their one advantage, which is knowledge of flow, because of regulations about prop risk. So that guy on the phone, he's being replaced by a robot. At the end of the day, what does a market maker do? He provid…
> I really doubt the figure that only 15% of trades were done by algo a year ago. Maybe a few jumbo orders skew it, but by ticket numbers I would think over 80% of trades are on some sort of automation.
I'm inclined to agree with you. The article seems to conflate "algo" and electronic trading, which doesn't help matters. In my experience, the majority of FX trades are just straightforward deals at spot - no algo required. It's only when you've got a really big deal that you want to spread out to avoid moving the market, or where you need to execute at the fixing, that an algo would come into it.
> "A year ago, algo orders placed by fund managers and other investors accounted for no more than 10-15% of total trading volumes.."
To my mind "trading volumes" refers to the amount being traded, rather than the number of trades, so maybe he means that the value of the algo orders amounted to 10-15% of the total value of all trades (e.g. ten algo trades for $5m each vs one voice trade for $500m).
Re: Forex Scandal Drives Shift to Algo Trading
#18I worked for 5 years as a software engineer at a forex hedge fund, contributing to the development of their algorithmic trading system. This shift started long before the forex scandal broke. Many different financial markets are becoming increasingly automated, and banks are developing their own trading algorithms in order to keep up.
That's buy-side, a different kettle of fish.
Re: Forex Scandal Drives Shift to Algo Trading
#19I worked for 5 years as a software engineer at a forex hedge fund, contributing to the development of their algorithmic trading system. This shift started long before the forex scandal broke. Many different financial markets are becoming increasingly automated, and banks are developing their own trading algorithms in order to keep up.
That's buy-side, a different kettle of fish.
We were indeed on the buy-side, but we traded with the banks on the sell-side, which we observed becoming increasingly automated.
Re: Forex Scandal Drives Shift to Algo Trading
#20Why post links that are behind a paywall? This needs to be downvoted.
It may be a great article but why post it here if nobody cannot read it?