Russell Nets FX Execution Cost Savings02.20.2018
Global asset manager Russell Investments said it has reduced its execution costs in foreign exchange trading by approximately two-thirds via a multi-layered netting approach.
“The goal is to cross as much internal liquidity as possible, be it Russell or other participants and take what is left to the market,” Jason Lenzo, Director of Equity, Fixed Income and FX Trading at Russell Investments, told Markets Media.
The firm’s Russell FX Network, which serves internal and external clients and incorporates Integral’s InvestorFX technology, first nets a client’s multiple orders against each other, which reduces the size of the trade,
Whatever is left is then netted across liquidity already in the RFX ecosystem, which might come from other asset managers, asset owners, or sovereign wealth funds, he explained. “Whatever remains goes to the market where banks and liquidity providers competitively bid on it.”
“Each of those steps is clear within the current context of the market,” said Lenzo. “It is done with best execution in mind as defined by European, US, Canadian, Australian, and global regulatory entities.”
Each client can approach the netting process independently, he added. “Some client want this to be automatic while other would like to see each process themselves and control it. It’s flexible for both.”
Russell’s approach to netting has saved clients an approximately 64% in FX execution costs, according to the firm.
“We measured the average execution cost for asset managers when they are trading in the market with, maybe, custodians or executing captured or directed order flow,” said Lenzo. “We took those costs and compared them to our average costs,” he said. “That is where savings figures come from.”
Although MiFID II’s best execution requirements have tamped down netting within the European equities markets, Lenzo has not seen the same occur in the FX market since the regulations went live at the start of the year.
“We have not heard questions regarding currency netting from clients,” he noted.
Lenzo also expects that Russell will be able to compress execution costs further going forwards.
“There are inefficiencies in the market that continue to exist,” he added. “There is enough volatility in the market that trading well and efficiently is critical.”
FXCM Pro's liquidity will be easily accessible to a pool of brokers, hedge funds and traders.
Major FX institutions are now looking to trade digital assets.
The pre-trade lifecycle can be cut from hours to seconds using existing bots.
New algorithms use quantitative approach to execution.
New offering will provide trade information, market impact and alpha calculations beginning in Q2.