FX TRADE EXECUTION
programmers and access to prohibitively expensive hardware. Historically,
these agencies with access
institutions to
techniques
were employed in governmental research or
supercomputers or h i g h-pe r formance compute grids. Few banks could have justified the cost to optimise their execution.
Advances in Technology Enable More Powerful Techniques
Advances in
cloud technology, distributed computing and the increased availability
and
diminished cost of commodity
generation
opportunity of
processing servers has created the
data- for
the simulation
next- tools.
Some companies are using these advances to help banks and hedge funds run large scale simulations quickly and cost effectively on the commodity hardware they very likely already own.
The industry has enthusiastically embraced this new technology. Decision makers have seen that
40 FX TRADER MAGAZINE April - June 2019
The FX market can learn from the progress made in equities, which is further down the same track
against a wider set of historical market conditions than played out in reality. The simulator can generate potentially millions of examples of stressed market conditions similar to – but distinct from – real-world stressed events.
What’s more, regulators are asking banks to prove that their execution algos do not contribute to a disorderly market. Without testing them out in simulated stressed
these agent-based simulators are a powerful tool for generating synthetic historical data which they can use to train more robust algos
conditions – and trying to model the potential actions and reactions of other algos, this proof can remain elusive. With the increased focus on FX execution from the buy-side, analytics capabilities are evolving rapidly – and in some cases leapfrogging
the
previous state-of-the- art analytics performed on market data.
The Future of FX Execution
A g e n t - b a s ed simulations provide a virtual environment in which participants can evaluate the quality of their execution and produce quantifiable measures of transaction costs, market slippage and
information leakage. Te FX market
can learn from the progress made in equities, which is further down the same track.
Executing trades “in silicon” before executing them in the real world provides the ultimate assurance to buy-side clients that the quality of execution is sufficient and robust.
John Hill
Head of Simulation Simudyne
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