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every other algorithmic trading engine does. We all work in the same markets. What we have focused on is to deliver both the full depth and breadth of the market smoothly through our automated technology so that the customer does not have to work hard to generate their own added value. Te technology has matured and we do not hear the debate about buy versus build anymore. Additionally the cost of external hosting has reduced dramatically so it really is a case of buying more and building less. Te real edge for traders should lie in their intellectual property and their trading ideas. Everything else should come out of the box. So a calculated market like FX Futures that is used by our opportunistic FX crossing strategies should be just as accessible as a direct FX Spot market thanks to the seamless integration of opportunistic and built-in algorithms in the Dealing Aggregator,” says Horowitz.
For Murphy one of the selling points for Bloomberg Tradebook is that it has a sizeable research and development arm which can be used to develop more customised algorithms. “If a client asks for a specific order type or specific workflow, we will figure out a way to develop an algorithm that will suit that clients’ needs,” he says.
Buy or build?
Despite the optimism of the likes of Bloomberg and Tomson Reuters and, presumably, all the other service providers offering algorithms to FX traders, they may still find it challenging to recruit customers form the proprietary trading space, as the head of one proprietary FX trading fund admitted. “We have always built our own algorithms and have never bought anything off the shelf. We did consider it but it did not make sense for a variety of reasons.”
“Tere might be a number of algorithms available that offer an opportunistic element which I’m sure they see as a selling point but I’ve not seen anything that really complements a TWAP or a VWAP algorithm. And while these algorithms try to be as fast as possible, I try very hard to be faster and I think I am. Buying in an FX algo may be a great way to catch up with the rest of the market but if you want to stay ahead, you really have to develop your own.”
Te firm has a number of trading strategies and the algorithms used are constantly adjusted to maximise the returns for these strategies but rarely is an entirely new algorithm introduced, meaning that the shelf life for an algorithm need not be too short. “We are constantly working on the logic and optimising the parameters and we will make special adjustments in the case of new ideas or certain market events but essentially the algorithms will last as long as the strategies they are designed for.”
Te trader does not rule out entirely the prospect of using external vendors for his algorithms or even for the supporting services, however he sees significant advantages in pursuing a path of in-house development in
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