Cboe FX allows users to access XTX Markets’ execution algo

abdelaziz Fathi

XTX Markets, a non-bank FX liquidity provider and market maker, has made one of its execution algorithms available on the Cboe’s institutional spot FX platform amid increased demand for FX algo trading.

Per a joint statement, Cboe FX Markets has teamed up with the London-based market maker to launch a hosted algorithmic execution service. The connection between XTX Markets and Cboe comes as algo trading as an execution strategy gains popularity with FX traders.

Cboe FX saw its average daily trading volumes amounting to $28.9 billion in August 2021, down -11.3 percent month-over-month from $32.6 billion in July 2021.

XTX Markets’ Execution Algo will enable Cboe FX users to benefit from its implementation shortfall execution algorithm, which aims to reduce slippage to arrival price. The institutional FX venue has also secured exclusive rights over use of the XTX Algo in the anonymous ECN space.

This collaboration covers execution of the most actively traded pairs in the spot FX market, including EUR/USD; USD/JPY; GBP/USD; AUD/USD; USD/CAD; USD/CHF; USD/CNH.

Jonathan Weinberg, Head of Cboe FX, attributed the uptake in algorithmic trading to a desire from Cboe FX ECN’s participants to minimise their market impact and achieve best execution.

“As the use of algorithms become more prevalent in the spot FX market, we couldn’t be more excited to be utilizing the expertise of a best-in-class FX market maker. This service will offer greater choice and transparency to Cboe FX’s participants in how they access liquidity as they seek to improve their execution quality, demonstrate best execution and drive automation within their FX operations,” he added.

Jeremy Smart, Global Head of Distribution at XTX Markets, said: “We are excited to be working with Cboe FX to enhance the distribution of our FX Algo product, which furthers our ability to reduce the FX community’s trading cost when patiently executing larger orders. We look forward to helping the platform’s participants benefit from our scale and market-making expertise in FX.”

XTX Markets has steadily climbed the ranks of electronic market makers, now commanding a significant portion of the spot FX turnover, displacing leading banks such as J.P. Morgan Chase in the process.

Further, XTX Markets was the largest electronic spot FX liquidity provider globally for the second year and was also the largest European equities liquidity provider in 2020 as it continues to build out a growing client franchise.

The use of algorithmic execution tools in foreign exchange has increased significantly as coronavirus-led volatility drives FX traders to seek increased efficiencies in trading.

Alongside other asset classes, the FX market has responded to the COVID-19 pandemic with worrying volatility. As a result, investors looked to so-called adaptive algorithms that are based on the machine learning model that allows incremental learning. This has led the adoption of algos by FX market participants to surge as traders seek a competitive edge.

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