TradeTech FX Europe 2023: FX swaps algorithms not currently a priority for buy and sell-side due to workflow preferences

Panellists agreed that the swaps market was going through a much-needed evolution in automation but concluded that the market is not yet ready for widespread algo usage.

Buy- and sell-side panellists speaking on day 1 of the TradeTech FX Europe 2023 conference have confirmed that the use of algorithms in FX swaps trading is not at the forefront of their minds.

Speakers agreed the FX swaps market – which is known to be far behind other instruments in terms of electronification – is undergoing a much-needed technological evolution thanks to necessary internal and external investment in the long-neglected credit system.

“The electronification of pricing in swaps has been around for 25 years, the second wave of electronification came around risk management and the third wave is now focused on electronic hedging,” said Simon Jones, chief growth officer at 360T.

360T is attempting to drive innovation in the FX swaps space with the launch of a new mid-book execution venue with visible bids and offers and API capabilities. Also set to launch is 24 Exchange’s new swaps electronic streaming platform aimed at bringing greater electronification to the market.

“There have been complexities around credit and holding a street price, but this is getting investment now,” said Paul Millward, head of product at 24 Exchange. “There has been a lack of infrastructure and demand has also held back development in this space. Divisions in responsibility between FX and STIRT have probably contributed to why electronification hasn’t happened in this market yet.”


However, while all panellists agreed greater electronification was positive for aspects such as access to axes and greater efficiency of trading, those representing the buy and sell-side on today’s panel said they were not currently interested in the use of algorithms for FX swaps.

“It’s not a main priority for us at the moment. It needs good TCA. We are currently 85% automated and do we want to go further? I don’t think so,” said Emmanuel Hurault, credit, FX, rates, and derivatives trader at Groupama Asset Management.

“We need good relationships and there is a human factor in that. We have specific problems that occur that you need a human to solve. The markets for G10 currencies are very liquid but for emerging markets not so much. I’m not convinced electronification will solves problems as related to liquidity. I need human contact.”

This was corroborated by sell-side panellist Ben Pearson, co-head of global G10 and PM STIRT [short term interest rate trading] at UBS. “Swaps algos are not at the forefront of our thoughts now. We don’t think it’s possible to build FX swaps algos to manage the STIRT franchise due to the market structure we find ourselves within.”

“The world owns more US assets than the US owns the rest of the world. There is a constant US dollar supply mismatch. We have certain periods of very high monthly flow and if we want to get risk flat when this is happening things could unravel very fast.”