High Frequency Trading in FX: Open for Business

A new report from Aite Group examines the presence of high frequency trading in the global foreign exchange (FX) market, provides details on the changing market dynamics of the last three years, and analyses evolving bank-to-high frequency trading relationships. It also profiles leading execution venues that play a vital role in facilitating high frequency trading in the FX market.

FX high frequency trading is poised to grow quite rapidly over the next few years as first-generation high frequency trading firms are joined by an influx of next-generation high frequency trading firms looking to capture new opportunities in FX. In addition, new high frequency trading firms have emerged in recent months, formed by FX quants and traders who have left large banks looking to capture new opportunities on the other side of the market. High frequency trading accounted for approximately 25% of overall trade volume at the end of 2009, a figure that is expected to hit more than 40% by year-end 2012.

“To date, the industry has mostly focused on high frequency trading in the equity market, often ignoring the fact that high frequency trading has moved well beyond trading cash equities,” said Sang Lee, managing partner with Aite Group and author of this report. “After close to a decade of existence characterised by novelty, euphoria, anger, denial, and acceptance, high frequency trading has carved up an important presence in the global FX market, creating more competition and efficiency.”

Execution venues profiled in this report include CME Group, Currenex, FXall, Hotspot FX, Icap (EBS), and Thomson Reuters.


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