Algorithmic trading sees growth in the FX market

With the advent of algorithmic trading, companies like FXSpotStream have remained focused on continuing to provide value to their clients


After raising capital from its founding banks, FXSpotStream (FSS) has added functionality to support FX algos and allocations over its API. Now live with multiple clients, this is the industry’s first multi-bank service FX algo API and provides access to the entire algo suite of its liquidity providing banks (LPs).

FXSpotStream was created in 2011 as a market utility to reduce the costs of trading FX as the ‘electronification’ of the FX market continued to accelerate. Originally supporting only FX spot, the service has grown considerably since its formation and now supports trading in FX spot, swaps, forwards, NDF/NDS and precious metals spot and swaps.

Clients pay nothing to access liquidity from up to 15 tier one LPs via a single API or GUI from sites in London, New York, and Tokyo, with no brokerage, data or hosting fees. LPs are charged a flat fee for the core streaming offering to trade an unlimited amount of volume, resulting in the LPs paying less on a per million basis as their volume grows; thus, clients can expect better pricing from the LPs.


FX algorithmic trading
The automation of the foreign exchange market has seen a strong shift from its roots of telephone trading, voice desks and opaque price information, to today’s technological world with online trading and streaming of prices. Algorithmic trading is another area of the FX market that has seen significant growth as clients aim to obtain a better price and execution, while limiting the risk on their part.

Today, algorithmic trading accounts for approximately 20 percent of all institutional foreign exchange trading volume and half of all equity trading volume. By supporting algos over their API, FSS are targeting a gap in the market – with most algos being supported over a GUI – and meeting a growing demand from clients. These functionality enhancements allow FSS to support the additional e-FX capabilities of their LPs and clients giving them wider access to liquidity while reducing the risk of information leakage.

Algorithmic trading accounts for approximately 20 percent of all institutional foreign exchange trading volume

FXSpotStream provides clients with access to over 70 different algos and 200+ algo parameters supported by the LPs. Clients will also be able to choose a specific liquidity profile at the bank with the ability to select to execute against the bank’s liquidity alone or a variation of the bank’s full offering.

A great deal of work has taken place to support this move, and the aim was always to make the interaction between client and LP as efficient as possible. Clients seeking to access the algos of the FSS LPs will not need to add any additional network infrastructure, connecting in the same way as they do today – accessing a normalised API through a single FIX session that provides access to algos offered by multiple providers.

The decision to accommodate FX algos will also see a move to FIX 5.0 standards and the addition of ‘amend and cancel’ capabilities. Clients will also have the added options of ‘fill now’ and ‘suspend and resume.’ This also includes support for resting orders and benchmark fixing orders, as well as spot, forwards and NDFs over the LP algos. Following the launch of the algo functionality over the API, algos are targeted to be available over the FSS GUI by the end of the year.


FX allocations
With the significant growth of hedge funds and wealth management firms, FXSpotStream has added functionality to support FX allocations over its API. The combination of the algo functionality with the support for allocations will appeal to hedge funds, asset managers, multinational corporations and regional banks. However, that is not the extent of their focus, and ultimately any client, with an interest in accessing the algo suite of a tier one provider or needing allocation functionality, will be able to utilise the new algo service.

Though pre-trade allocations are generally executed in the RFQ protocol, FSS will support this for full amount ESP orders. Post-trade allocations will be limited to those clients pre-approved by their LPs. Allocations can either be implemented by the client or through an OMS or third-party vendor. FXSpotStream is vendor agnostic and actively encourages clients to discuss their opportunities with our partners to find the one that best suits their needs.