High Frequency Trading accounts for over 40% of FX trading

LMAX Exchange

Within the context of the FX trading the terms “high frequency trading” and “automated trading” are interchangeable. Automated trading represents trading activities driven by systems that (1) automatically determine when and where to trade based on input of internal and external data and (2) trigger order flow into execution venues via APIs. Automated trading firms continue to make their presence felt in the FX market―slightly more than 40% of trading volume in spot FX is currently represented by high frequency trading.

Unlike the equities market, however, it is unlikely that automated trading could account for more than 50% of overall volume. Indeed, the sheer diversity of FX market participants and their varied reasons for participating in the market would make it difficult for a single group of FX market participants to overwhelm the rest. It should also be noted that at least half of the 40% HFT presence in the spot FX market is represented by banks themselves.

Estimated Adoption of HFT in Spot FX

uk-share-global-fx-40-2013

Source: Aite Group ‘Global FX Market Update 2013: Increased Market Transparency, More Competition’, June 2013

David Mercer, LMAX Exchange CEO, shares insights.

Source: Aite Group ‘Global FX Market Update 2013: Increased Market Transparency, More Competition’, June 2013

Video Transcript

High Frequency Trading accounts for over 40% of FX trading

The Aite Group report states over 40% of Spot FX volumes are the result of high frequency trading (HFT). David Mercer, LMAX Exchange, CEO comments this statistic is interchangeable with automated trading strategies, however not all automated or algorithmic trading is high frequency. The current use of algorithms is driven by individuals seeking precise, accurate execution which is expected to grow, meaning within 10 years the use of algorithms could grow to over 70% of Spot FX volumes.

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