Exchanges for doing high frequency cash FX trading?

(Last Updated On: June 25, 2011)

Exchanges for doing high frequency cash FX trading?
What cash FX exchanges have the most volume and are most suitable for HF trading strategies?

We trade in the FX futures and would like to extend that to cash FX trading, but I have heard that some exchanges limit the counterparties you can trade with and/or can’t handle HF order speeds.
there are a number of spot FX exchanges, and each has its own niche and profile in the market. Each also has its own set of restrictions on behavior, so that you need to understand and gear your strategies accordingly in order to not only stay in good graces with the exchange but also optimize behavior. By volume (roughly), the exchanges are: EBS, Reuters, Currenex, Hotspot, FXall, Integral, Bloomberg. There are also some new ones popping up that might be interesting, and of course there are all the bank platforms as well.

Feel free to reach out to me directly for more info. Helping people adapt their HFT models to the FX market is what I do. You can view my profile and visit my website to learn more about my practice: http://dfxconsulting.com

Thanks for the advice. I took a look at your website, thanks for the article links.

I’m really looking for a spot FX exchange that displays a limit order book, has a streaming UDP price feed and offers direct access via FIX or a binary protocol (not an API). Our models grew out of trading futures and cash equities and I don’t know if I want to try and adapt them to an exchange that has antiquated trading rules (last look) or technology.

I’m hearing that Currenex, Hotspot and Accelor are better suited for me than EBS or Reuters.
one of the things my clients coming into FX from other asset classes (equities, energy) are always amazed by is the varying quality of FX market data and the “quaint” trading rules. It’s important to understand that some of the restrictions on behavior are imposed by the exchange to accommodate their screen-based customers, while other curbs are reflections of technological limitations. Understanding each exchange’s nuances is critical to optimization of your strategies.

I’m not sure I understand what you mean by “offers direct access via FIX or a binary protocol (not an API)”, since I think of FIX and binaries as being API’s. The risk you run by excluding certain exchanges due to your models’ design is that you will be bypassing a good amount of liquidity. EBS and Reuters are #1 and 2 in terms of ADV. It’s certainly possible that Currenex, Hotspot and Accelor (FXall) are better suited for your models, but I’d be wary of systematically avoiding the two deepest pools of liquidity. Furthermore, EBS and Reuters are the only exchanges mentioned that do NOT permit any form of last look, so I am not sure about the quality of the information you are receiving.
FIX and binary protocols run over TCP, so they are easy to implement in any language.

If you have to support a Java or C/C++ API, that can be considerably more painful.

I appreciate your insights.

On that note, I’ll leave you with one final thought: painful steps can be beneficial, in the sense that if they are painful to you, they are painful to others, and others may not take the trouble to do the hard work. That could spell opportunity for you. The lowest hanging fruit in the FX world is pretty well picked over, believe me. Best of luck.
do any of these platforms not have “last look”?
As I said, Nick, EBS and Reuters do not. They are the two truly anonymous wholesale-oriented platforms. The others do offer some version of last look to at least a portion of their liquidity providers.
last time I looked , EBS had a 100 ms built in delay …is this still the case?
it was suggested for user to keep prices in for 100ms, but never built in, I think it is now built in @250ms (Can check to confirm if you want). As for last look, the newer ECN all have it( or can), but you can work with the ECN to make sure the prices you are getting are Market Makers that do not use or abuse the last look. The the delay makes a more even playing-field for the manual traders, it also means if you see a price you have a much better chance of getting it, as you only have to worry about someone getting it before you, and not also someone pulling the price before you can get it.

The last look on the ECNs gets a lot more credit than it should, many times the price goes in , and comes out before you can hit it, rather than hitting the price and have a last look not give you the fill. It still means you don’t get filled, but the MM is not necessarily rejecting your trade, just got pulled before you got to it.

Still very annoying and not a lot of fun to try to figure out what amount of the book showing you can actually take.
the MQL (minimum quote life) on EBS–it is 250ms, but I believe it’s just for the 5 major pairs that trade most heavily on EBS: EURUSD, USDJPY, EURJPY, USDCHF and EURCHF.

Still, that is not the same thing at all as a last look. It is just how long you have to persist your orders there, so that keyboard traders have time to trade on them. EBS has tried to balance the needs of the HFT traders and the traditional screen traders (spot dealers at banks, mostly). It’s a difficult balancing act, but I think they have been successful in trying to meet both groups’ needs.

Reuters is coming out with some significant upgrades to their infrastructure. They have the most liquidity in the Commonwealth, Asian, Latam and Eastern European pairs, and their market data will be improving tremendously this fall. Combined, EBS and Reuters probably comprise over 70% of ADV in ECN-traded spot FX. So IMHO, developing a system to trade FX that bypasses those two exchanges is a questionable idea.
We host http://www.aphelion.se/ check them out and let me know if what they do would suite your need. We provide proximity hosting for their services, if you think they are of interest let me know and i can get them in touch with you,

NOTE I now post my TRADING ALERTS into my personal FACEBOOK ACCOUNT and TWITTER. Don't worry as I don't post stupid cat videos or what I eat!

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