Aegis Software (booth 1522) has enhanced AthenaTrader, its multi-asset order execution system, to support automated trading on several leading foreign exchange ECNs, including Hotspot FXi and Currenex ESP. The integration will allow users to implement program trading strategies directly in the spot FX market, or add an FX component to automated trading strategies across global equities, futures and options markets, which AthenaTrader already supports, the vendor says. According to Aegis, AthenaTrader is linked to the ECNs via an internal FIX gateway, providing users with real-time FX trading and live, streaming, executable market data from the ECNs' network of bank market makers and institutional clients.
Aegis integrated the FX ECNs on the desktop at the request of customers, especially hedge funds that are "looking for the ease of execution and lower cost of calling their brokers or bank and getting a rate," notes Norman Friedman, VP of Aegis Software in New York. Customers also requested anonymity, he adds.
"The ability to access different ECNs on a single platform could potentially assist with the development of multi-asset algorithmic trading," comments Harrell Smith, manager of the Institutional Securities and Investments Group at Celent in New York. To manage the fragmentation that can arise from multiple FX liquidity pools, Aegis also is offering an FX montage displaying real-time prices across the FX ECNs. The Aegis FX montage displays Nasdaq-like Level One - top-of-book --and Level Two - depth-of-book - prices for multiple players, Friedman relates. "We help you find best price across the entire marketplace," he says. The FX montage already is installed at several sites, including one of the largest hedge funds, according to a company release.
"It sounds like they're trying to replicate the equity montage model in the FX markets," Celent's Smith says of the FX montage. "The ability to interact with a number of FX ECNs through a single platform certainly is worthwhile and would be popular with customers."
However, Smith points out, there are differences between the FX and equities markets that could raise some challenges. For example, in the equities markets, a trader will submit one order to a venue, whereas in FX, dealers are sending out multiple orders to multiple trading systems or providing duplicate streams of liquidity to a number of different platforms. "If you hit somebody on one platform, that's going to take out that particular dealer's liquidity on that platform at [that] price level," he says. "Then they are immediately pulling or adjusting their bid-offer spreads, which can lead to so-called false liquidity in the FX markets."
But the FX ECNs show signs of attracting more liquidity from the automated trading shops. For example, on HotspotFXi, direct client-to-client matches account for approximately 45 percent of daily trading, totaling several billion dollars, according to Aegis. This trading activity is driven by proprietary algorithmic and statistical arbitrage models that are being adapted to spot FX, the firm says.
Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio