Moscow Exchange (MOEX) has unveiled a new FX algorithmic trading service in a major upgrade to its infrastructure, which comes amid Kremlin-backed efforts to make MOEX one of the world’s leading financial hubs.
Although slightly late to the party, MOEX says it will provide a comprehensive offering that allows users to employ different ways to set time-weighted orders: specify the number of linked orders or specify the time interval between orders.
Russia’s leading venue first adopted the basic TWAP (Time-weighted Average Price) algorithm trading strategies. TWAP executes at a time-weighted average price over a specified period and seeks to improve execution by minimizing spread crossing.
By leveraging the breadth of MOEX’s liquidity network, emerging markets connections and FX expertise, these strategies could help users make their FX execution more efficient.
“The Algorithmic Service is implemented to form a packet of linked orders that are entered into the Trading System at the due time. There are no collateral reservations for algorithmic packet. Required amount of collateral is calculated as usual, when each linked order enters the Trading and Clearing system,” MOEX further explains.
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The use of algorithmic execution tools in foreign exchange has increased significantly since March 2020 as coronavirus-led volatility drives FX traders to seek increased efficiencies in trading.
Alongside other asset classes, the FX market has responded to the COVID-19 pandemic with worrying volatility.
According to the findings of a client survey conducted by JPMorgan, the US bank clients looked to so-called adaptive algorithms that are based on the machine learning model that allows incremental learning. This has led the adoption of algos by FX market participants to surge as traders seek a competitive edge.
As FX market participants adopt sophisticated analytics enhanced by artificial intelligence and machine learning, more than 60% of trades for ticket sizes of more than $10 million were executed in March via algorithms. This was compared to less than 50% a year ago as the potential benefits of algo trading are becoming clear, and hedge funds and real money accounts are leading the charge.