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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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