FX Algo News - The role of pre-trade analysis in FX algo selection

Best execution is not simply about measuring transaction costs, and other relevant metrics, after a trade has been executed. Best execution is a process, whereby informed decisions are made throughout a trade’s lifecycle, pre- and post-trade, in order to achieve the best possible result for the client.

The modern foreign exchange market is a complex beast, providing participants with many different methods of execution. Within each execution method, there are a multitude of factors, and therefore additional decisions, to consider. For example, if you are employing a request for quote (RFQ), how many liquidity providers should you request quotes from and which ones? Or, if you are considering algorithmic execution, how do you select from the extensive range of products now available, and when a specific product is chosen, how should you select the parameters to use? In addition, do you want to access the market directly and have your liquidity provider place orders on your behalf, or do you want to simply execute with a counterparty as principal? If the former, are there specific venues you would like to access? The decision-making process can clearly become quite complex pretty quickly.