FEATURE


Court cases such as the one involving the custody bank that is mentioned above have been due to the lack of transparency over FX prices and best execution, says Gozlan. “Firms now want to know much more about how orders are priced and routed against the single bank venues so it is about aggregating multiple bilateral services and micro-managing those services.”


Tere may be no regulatory mandate for seeking best execution in the FX market but Gozlan believes that it will become more important for trading firms, especially for those firms engaged in indirect FX trades, where an FX transaction may be part of multi-asset trading strategy or part of an auto-hedging transaction. “We are seeing more concern from clients around their execution. Tey are asking about their hit-rates and asking why the smart order routing engine went to one location and not another. Tey are also enquiring as to how they can test the different ways to access the market and use post-trade data to conduct some back-testing for their algorithms. So the audit capability provided by post-trade data services is very important and a strong selling point for liquidity providers and vendors.”


Fine-tuning


Gozlan feels that the adoption of aggregation services has reached a point where the vast majority of participants are now using a platform of some kind. Te job for the platform providers therefore is less about selling the benefits of aggregation itself and more about fine-tuning their offerings to suit the specific trading preferences of their clients. “It is like mobile phones. Nowadays almost everybody has a phone but there are the extra features and functions that people want. Tis is what we now have to provide as part of an aggregation platform. For example, we may have to include some crossing aspects or dark liquidity pools or more transparent liquidity sources. I don’t think one approach is the answer to everything. And you have to remember that the aggregation platform is only part of the liquidity management system. All of these different systems have to co-exist as efficiently as possible so it is about aggregation and integration.”


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