e-Forex-May-23

FX Automation:
Pushing Boundaries
Sebastian Hofmann-Werther, Head of EMEA at 360T, teases
out some of the nuances associated with automated trading
solutions in FX.
Asian currency pairs, but if it has
no overnight desk then it might be
forced to trade in hours when those
pairs are less liquid. Using a set of
completely customisable parameters
this hedge fund could instead autoexecute
these trades at a time when
EXPERT OPINION
Sebastian Hofmann-Werther
In the FX industry people often talk
about “the buy-side” as a collective
group when in fact there is a huge
degree of diversity within this segment
of the marketplace — both in terms of
the structure and operations of these
firms as well as their execution methods
and objectives.
However, over the past few years
we’ve observed one trend that remains
consistent across this heterogenous
group of firms called the buy-side, and
that’s the strong desire to automate
more of their FX activity utilising
execution management systems (EMS).
But because these firms are all different,
so too are their automation priorities.
For example, a very large asset
manager trading on behalf of
thousands of funds might focus
on ways to automatically net off
positions between them all in order
to reduce the overall amount of FX
they have to trade, and thus reduce
costs.
By contrast, a key goal for an
institutional investment manager
trading international equities might
be to minimise the amount of time
between their equity transaction and
the FX trade necessary to facilitate
it, in which case automating the
latter can help achieve this. A hedge
fund in the US might need to trade
liquidity conditions are much more
favourable in order to improve the
pricing available.
A corporate treasurer, meanwhile,
might look to automate parts or
all of their FX workflows in order
to reduce the amount of manual
processing on the desk, freeing up
staff to focus on other more missioncritical
activities and minimising the
operational risks associated with these
processes. Often there are concerns
that the increased automation of
FX execution will negatively impact
treasurers’ relationships with their
bank partners. But contrary to this,
the time which the treasurers save on
manual execution processes opens up
more room for strategic dialogue with
the banks.
Suffice to say, the specific use cases
and benefits of this technology are
myriad, but an overarching theme
amongst every firm that we speak to
is that they are looking for ways to
increase productivity and drive new
efficiencies on the trading desk, and
automation is one way of doing this.
34 MAY 2023 e-FOREX