BestX Crypto Hourly Fixing Benchmark

Block-chain technology and cryptocurrencies are gaining popularity, not only in the retail world, but also in finance. Some have gone as far as regarding it as the industrial revolution for finance, and the increasing number of institutional players disclosing their ambitions in the digital space reinforces this vision. Whilst the commitment to these new markets cannot be doubted, the success of this nascent technology is far from guaranteed.

At BestX however, being at the forefront of financial analytics, we see an opportunity to improve transparency and drive efficiency in the space by creating an official crypto fixing. A robust hourly fixing would provide the crypto world with a trustworthy benchmark that could be applied to smart contract execution, ETF calculation and crypto future settlement.

In this paper, we explore the methodology for the creation of such fixing and its use-cases. Please email contact@bestx.co.uk if you are a BestX client and would like to receive a copy of the paper, which is also hosted within our FAQ section of the UI.

BestX Algo Insights: Algo Density Intraday

Technology has revolutionised FX trading. It has been widely documented that increasing automation and electronification has reshaped the structure of the FX market. As algos continue to grow in popularity, it is essential to know when and how to best utilise them.

Our latest research will discuss a new metric - algo density which sheds light on the intraday pattern of algo usage.

Please email contact@bestx.co.uk if you are a BestX client and would like to receive a copy of the paper, which is also hosted within our FAQ section of the UI.

Expected Future Order Flow: How your trades generate more trades

In our latest research we take a look at the correlation between parent orders in the BestX trade database to understand how each trade can cause further trades in the market. From this data we can the fully assess the total market impact of a parent order that is split up into many child orders.

Please email contact@bestx.co.uk if you are a BestX client and would like to receive a copy of the paper, which is also hosted within our FAQ section of the UI.

How long should TWAP algos run?

Our latest research looks at how the duration of TWAP changes with trade size and market conditions. We build a model that accurately reflects how TWAP durations change across currency groups and use this type of model in a number of interesting ways. In the article you will find:

• Full details of the model and how it is structured.

• How TWAP durations changed over the COVID crisis.

• How estimating a TWAP duration for a trade can build a new benchmark to judge decisions.

Please email contact@bestx.co.uk if you are a BestX client and would like to receive a copy of the paper, which is also hosted within our FAQ section of the UI.

How Does a Limit Affect Algo Performance?

Our latest research looks at the impact using a limit has on algo performance. By using double machine learning we find there is no causal link between using a limit and algo performance.

Please email contact@bestx.co.uk if you are a BestX client and would like to receive a copy of the paper, which is also hosted within our FAQ section of the UI.

The Best Execution Choices around the WMR London Close Fix

Our latest research focuses on WMR 4PM fixing execution pattern. The paper aims to explore the cost and benefit of different fixing execution strategies whilst identifying the potential information leakage before the fixing. We do this by comparisons against the BestX Expected Cost, assess deviations in the official WMR fix vs observed market mid rate at that time, apply our signalling risk metrics to the market paid/given data and finally interpreting the published WMR bid/offer spreads.

Please email contact@bestx.co.uk if you are a BestX client and would like to receive a copy of the paper, which is also hosted within our FAQ section of the UI.

Equity Venue Analysis

Our latest research is focused towards Venue analysis in the Equity TCA space. The paper aims to explore the various venue statistics which aims to help the user to measure, identify and choose venues most closely aligned with their execution strategies.

Please email contact@bestx.co.uk if you are a BestX client and would like to receive a copy of the paper.

Analysing the relationships between liquidity, volatility and momentum

Our latest research article is an extension of our ongoing work investigating the three market variables that are key when planning an execution strategy: liquidity, volatility and momentum. This piece extends the previous research in that we analyse the relationships between these variables to attempt to identify any causal effects, i.e. does one factor drive another? Using Granger causality we find that liquidity is the key factor in the ecosystem, driving changes in both volatility and momentum.

Please email contact@bestx.co.uk if you are a BestX client and would like to receive a copy of the paper.

Volatility spikes and impacts on liquidity

Predicting events, such as spikes in volatility, in financial markets is notoriously difficult.

At BestX we have been researching the use of Hawkes processes to model events, and our latest paper is a follow up to our publication on this subject in August 2020.

We extend the framework to model the impact on liquidity, and therefore transaction costs, with the use of an unsupervised machine learning method to categorise the number of observed liquidity states for a security. This provides the potential for an ‘early warning system’, resulting from monitoring, for example the VIX index, to indicate if sudden changes in liquidity are expected.

If you are a BestX client and would like a copy of the paper please contact us at support@bestx.co.uk.

Measuring an Algo Fill Profile – Centre of Mass

In our latest research article we present a new method for visualising the execution path of an algo and whether it executed more of the total notional at the start of execution period (front loading) or at the end of the period (back loading).

We condense this fill profile into a new metric, Centre of Mass, that can classify individual executions as either front or back loading. There isn’t necessarily any right or wrong as it clearly depends on the algo’s objective and the prevailing market conditions, but it can be useful to understand the behaviour when analysing an algo’s performance. This metric can therefore be used in conjunction with other BestX metrics (e.g. performance versus Arrival, market impact etc) to assess the performance differences across front and back loading algos.

Please email contact@bestx.co.uk if you are a BestX client and would like to receive a copy of the paper.

Momentum & Range Regimes – Adding & Conserving Alpha

In our latest research article we expand the regime framework we have previously used to predict volatility and liquidity regimes, and apply it to price direction. Using a novel machine learning method, we categorise the market into Momentum (up or down) and Range regimes, and demonstrate applications of the regime predictions to both alpha generation, and also alpha conservation. The latter is done via the comparison of execution performance in the different regimes, with Range regimes generally demonstrating lower spread costs.

Please email contact@bestx.co.uk if you are a BestX client and would like to receive a copy of the paper.

Update on the BestX Event Risk Model

Our latest research article provides an update from the BestX event risk model that we introduced in August this year. Recent moves in the VIX, and the forthcoming US election, have resulted in the model triggering. This means that the probability of further shocks has increased, and any additional spikes leading up to the election would cause the model to start predicting an impact on transaction costs. We will continue to monitor closely.

Please email contact@bestx.co.uk if you are a BestX client and would like to receive a copy of the paper.