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High Touch Desks Get Best-Ex Due Diligence
The buy side is closing a major gap in its best-execution due diligence: The order routing practices of high-touch trading desks are falling under intense scrutiny previously reserved for self-directed trading tools. This increased attention presents a major challenge for brokers who use a variety of low-cost algorithms from multiple providers, since they have limited knowledge of how those algorithms route orders, let alone control over their behavior. Fortunately,

A year ago we described new predictable trading patterns that developed after the WM/Reuters 4pm London Fix window was expanded to 5 minutes. On average, the direction of rate changes at the start of the window predicts the direction over the remainder of the window. This momentum during the window is followed by a reversion afterward. Our latest research update on this trading pattern is available here.

While the WM/Reuters 4pm Fix was initially intended to

On February 15, 2015, WM/Reuters adopted a five-minute window to calculate its 4 p.m. currency benchmark rates, also known as the Fix. This change, in conjunction with the industry’s reported shift toward automated handling of Fix orders, has created new patterns in currency trading around the Fix.

Anecdotal reports suggest that banks are shifting away from handling Fix orders as principal trades on the spot desk toward agency-style execution, specifically time weighted average price (TWAP) algorithms