Evaluating FX Execution Systems and Venue Aggregators

# how do you evaluate an FX market EMS?


# how do you evaluate an FX market EMS?












My firm is investigating FX EMS systems to see if we can reduce execution costs for our trading strategies that involve FX (not low latency).

The liquidity providers are a few major banks. We're interested in the potential to include more banks and ECNs if we find there are advantages to this through being able to aggregate many venues efficiently.

## Answer by moke (score 4)

https://quant.stackexchange.com/a/7775

Trading through an ECN is a good idea, FXALL is probably a bad choice since they have such a small market share. Currenex and Hotspot are both better. EBS (in EUR, JPY, and CHF) and Reuters (in GBP, AUD, CAD) have the largest market shares, but they both are expensive to set up and require monthly fees regardless of how much you trade, their liquidity in pairs where they are not the primary exchange is poor, and their technology is atrocious. Currenex would be the top choice for good liquidity in all pairs (about 10% of overall volume, compared to 5% for hotspot, and 1% for FXALL), execution algos available through their API, and general quality of their technology.

It sounds like you may be best suited to using an aggregator, I would not consider Reuters or Integral and I am not familiar with Apama or Portware. I am familiar with MarketFactory and Flextrade. Flextrade is mature technology and will get the job done. It's a simple FIX api to send orders, and you can write your own algos or use some off the shelf. MarketFactory is newer and from what I know about it it's the best off the shelf aggregator, but I have only seen their marketing material, I've never used the product.

@pedro Banks will only give you tight spreads if they are making a lot of money off you, so it's kind of a mixed blessing.

@assylias Fees are under $5/MM which is less than .1 pips. The aggregate spread on an ECN is going to be tighter than from any single counterparty 90%+ of the time.

## Answer by Nonefaster (score 3)

https://quant.stackexchange.com/a/7786

Your aggregator should be coding not just to the FIX feeds but the specialized protocols. FIX just gives the bare minimum. For example, Hotspot's FIX certainly works but is throttled and doesn't have the full market data detail. You need their Itch. For Currenex, you need their Itch and Ouch.

Your aggregator provider should also give impartial advice and give the full functionality of each ECN without making it complicated. The FX ECNs are very different in structure and which currencies they are strong at. For example, EBS is strong in USD/JPY and EUR/USD, Reuters is strong in commonwealth pairs. Hotspot is good at crosses. FXall, Currenex, also the bank APIs each have their uses. Some ECNs and banks are better than others at different times of day, some are better whether you are an aggressor or making prices etc.. It is a very fragmented market.

Ask your aggregator whether they are being paid by the banks or ECNs. Someone mentioned this. If so, it is not an impartial aggregator.

## Answer by Frankie (score 0)

https://quant.stackexchange.com/a/7778

Just my two cents but both HotspotFX and Interactive Brokers provide what you need on a corporate level. If you want a simple and "clean" solution you're not looking to support several different formats from several different banks and having to manage your liquidity across all those providers.

Hotspot FX - FIX - API's: Java

Interactive Brokers - FIX - API's: Java, C++, DDE for Excel, ActiveX

Go with FIX. Fix is supported by both Hotspot, IB and all the major banks. If you develop around FIX you'll have it almost 'plug-and-play' to the major providers. There is also a nice FIX API for your language of choice `.Net` on QuickFIX.