Pragma Unveils SmartFix Algo, Streamlining FX Trading With WM/R Fix

Pragma SmartFix was designed to help improve average execution performance against the daily FX benchmark fix.

Pragma Securities, a provider of high performance algorithmic (algo) trading tools, has launched a new element of its product suite, tapped Pragma SmartFix, which serves as a streamlined execution algorithm for the daily 4pm WM/Reuters foreign exchange (FX) benchmark fixing, according to a Pragma Securities statement.

The daily 4pm WM/Reuters FX benchmark fixing is one of the most utilized constructs in the financial world, part of a vast currency trading network that’s in excess of $5.3 trillion a day. The past couple of years has seen a large focus on the WM/Reuters FX benchmark fixing, given its past propensity for manipulation and rigging that saw record fines slapped on leading banks.

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Lessons Learned

Pragma SmartFix was designed to help improve average execution performance against the daily FX benchmark fix, based on acute patterns in a recently released research paper by Pragma. The utility was built on expert recommendations and insights, supplied by leading regulators, given their handling of several lengthy probes as well as experience in the vulnerabilities to the fix itself.

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The original methodology surrounding the WM/R benchmark was altered back in February 2015, which effectively widened the calculation window from just 60 seconds for the most liquid currencies to five minutes, a four fold increase. As a result, Pragma SmartFix will aim to improve overall trading performance through transparent means, as well as fostering high risk management techniques.

David Mechner, CEO, Pragma Securities
David Mechner, CEO, Pragma Securities

Pragma SmartFix will also complement the group’s existing FX platform suite for banks and asset managers, i.e. Pragma360, which presently includes a plethora of execution algos, transaction cost analysis (TCA), risk controls, and an algo monitoring system known as Panorama.

According to David Mechner, Chief Executive Officer (CEO) at Pragma Securities in a recent statement on the launch of Pragma SmartFix: “For traders that are constrained to match the fixing rate, our algorithm can reduce risk relative to a simple TWAP, and can also improve execution quality for a modest increase in risk. This makes it a good tool for banks servicing customer fix orders whether in a principal or agency manner.”

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