How Algorithms Work In Finacial Markets !

Contents

1_ Execution algorithms in the FX market: taking stock ......................... 4

1.1 Background to FX execution algorithms .............................................. 4

1.2 Adoption and evolution of FX execution algorithms ......................... 5

1.3 Prevalence of FX execution algorithms ............................................... 7

1.4 Users and usage of FX execution algorithms ..................................... 8

1.5 Providers of execution algorithms ...................................................... 12

1.6 Provider-user relationship .................................................................... 13

1.7 Algorithm safety ..................................................................................... 13

1.8 Outlook for the use of execution algorithms in the FX market ...... 14

2_ The design and application of FX execution algorithms: what they are, what they do and how they work .............................................................. 17

2.1 Types of FX execution algorithms and key trade-offs ..................... 17

2.2 Application and usefulness of EAs in a fragmented FX market .......... 22

2.3 Execution scheduling .......................................................................... 24

3_ Implications for market functioning ................................................... 26

3.3 Market-wide implications of FX execution algorithm usage ......... 26

3.2 Considerations for the effective use of FX execution algorithms ..30
3.3 Market-wide implications of FX execution algorithm usage ......... 35

4. Conclusion ................................................................................................. 37