BestX FX Forward Methodology on Broken Dates

The FX forward market is one of the biggest components in FX trading. Market data is readily available for standard tenors (i.e. 1 week, 1 month, 3 months etc); however, the majority of forward trades will settle on broken dates rather than these standard tenors. Therefore, to provide an accurate mid price for these dates there must be some degree of interpolation between the standard tenors. In this paper, we will discuss how BestX constructs the forward curve to provide clients with accurate forward points on broken dates.

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 New Benchmark ECV20

In the equity execution space, traders typically split a large order into small orders and there is a myriad of ways to slice an order. One of the most straightforward ways is to use VWAP with a 20% participation rate. To help the trader to assess the quality of trading, BestX would like to propose a new benchmark ECV20 (Expected Total Cost for VWAP with 20\% participation rate).

In this paper, we explore the methodology of ECV 20 benchmark. 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.

FX Algos - evolving the taxonomy

Back in August 2018, we launched our first iteration of ‘Algo Styles’, introducing a taxonomy to categorise the plethora of different  algos (160+ unique algos) we have seen through BestX. Click here for the initial article. The goal of this exercise was to create a mechanism to compare performance of similar algos, allowing our clients to make more informed decisions. The balance is always between introducing too many ‘styles’ making the buckets narrow and impractical for comparison, against too broad that you’re then comparing apples and oranges. We have been deliberately cautious of introducing additional styles, but listening to feedback from both sell and buyside clients, we think now is the time to introduce an additional Style: Pegged.

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.

Impact of Competition and Panel Size on Transaction Costs

Putting multiple counterparties in competition is rationally perceived as a way to reduce transaction costs. However, the process of establishing and maintaining relationships with dealers is costly, and thus it is not always economical to have more counterparties. Moreover, a higher panel size may induce more information leakage. Therefore, there is a balance between more competition and potential information leakage to arrive at an optimal panel size for a given trade. In this report, we leverage BestX optin pool data to empirically examine the impact of competition and panel size on transaction costs.

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 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.