Pragma was recently named ‘Best Front-Office Initiative’ provider at the AFTA’s – for the second year in a row.
“Average daily reported UK foreign exchange turnover was a record $2,881bn (€2,671bn) in the survey, a 2% increase from the previous high in April last year and an 11% increase from October 2018.”
Dan Marcus, chief executive of ParFX, and Curtis Pfeiffer, chief business officer at Pragma, both agreed that the results highlight the importance of London to global FX markets and the long-term trend of sustainable growth.
Read what Dan Marcus has to say about FX swaps and non-deliverable forwards and Pfeiffer on spot trading in Markets Media.
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Tradeteq, the electronic trading platform for institutional trade finance, picked up the award for the ‘Best Collaboration Initiative’. The accolade recognises their efforts to work with over 20 banks, financial institutions and trade associations to close the $1.5tn trade finance gap through the Trade Finance Distribution Initiative (TFD Initiative), for which it is the distribution technology provider.
Additionally, Pragma has won the ‘Best Front-Office Initiative’ accolade for its innovative multi-asset, broker-neutral algorithmic execution platform, Pragma360. The platform enables front-office professionals to create a unique algorithmic trading suite under their own corporate brand.
Christoph Gugelmann, CEO of Tradeteq, commented: “Winning this award recognises the transformative change Tradeteq is bringing to the trade finance market. By partnering with some of the leading trade finance banks, we hope to transform this market into one that is operationally efficient, scalable and easily distributable. Through the use of our credit scoring AI and electronic trading platform, the TFD Initiative’s members can boost trade finance distribution and contribute to closing the trade finance gap.”
David Mechner, CEO of Pragma, was extremely pleased to win the award, stating: “In recent years, the front-office has focused on regulators’ calls for more transparency around execution quality and market impact. Winning this award is recognition of Pragma’s efforts to help front office professionals respond to this mandate using the most-advanced trading and execution tools.”
For more information about some of the great work we do for our clients, click here: https://www.chatsworthcommunications.com/work/
Hosted by FX Week, these awards recognise excellence in the electronic Foreign Exchange market.
Pragma’s multi-asset broker-neutral algorithmic (algo) execution platform, Pragma360, is leveraged by large banks and brokers to handle their enterprise trading needs. It is deployed as a hosted and managed technology service and enables a sell-side institution to create its own unique algorithmic trading suite under its own corporate brand.
In 2018, Pragma incorporated 1600+ software changes on behalf of its clients, while giving clients the control to adapt algorithms directly where necessary. In addition, Pragma handled over $1.3 trillion of algorithmic flow in multiple asset classes on behalf of our clients across over 50 venues.
David Mechner, Chief Executive Officer of Pragma Securities, commented:
“We are delighted to receive this award as recognition of the teams hard work over the past year. We are always trying to improve our service by onboarding our clients and making necessary changes as swiftly as possible. Ensuring our clients are satisfied with our service is the main priority for us, and winning this award shows that we are continuing to do this.”
“Looking to the future, we are aiming to continue on this path and remain fully committed to enhancing our offerings and providing our clients with a high-quality product.”
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Analysis of more than four million orders identified significant degradation in execution quality, for stocks priced under $40 per share
Pragma Securities (Pragma), a multi-asset quantitative trading technology provider, has published new research showing that the Securities and Exchange Commission’s (SEC) Tick Size Pilot Program has had a negative impact on market quality and execution – costing investors more than $300 million since it was implemented.
The research paper, entitled ‘Tick Size Pilot – Evaluating the Effect of the Pilot Program on Execution Quality’, estimates that investors trading stocks priced under $40 incurred significant costs. The total additional cost for all Test Group stocks could exceed $350 million by October 2018, when the pilot is expected to conclude.
Born out of the Jumpstart Our Business Startups Act (“JOBS Act”), the SEC’s two-year Tick Size Pilot Program commenced in October 2016. It was intended to evaluate whether widening the minimum quoting and trading increments – or tick sizes – for stocks of smaller capitalization companies (under US$3 billion) would improve the market quality to the benefit of U.S. investors, issuers and other market participants.
David Mechner, CEO of Pragma Securities, comments: “While the SEC’s Tick-Size Pilot was launched with the intent of helping investors and issuers, the outcome has been very different. Concerns around execution quality and costs for investors were raised early on, and proved to be well-founded. Given our findings, we strongly recommend that the Tick Size Pilot be unwound at the end of the Pilot period.”
Read the Wall Street Journal’s incisive article to learn more about the Tick Size pilot program.
On 25 May 2017, the FX Global Code of Conduct was launched to promote the integrity and effective functioning of the wholesale foreign exchange (FX) market.
One year on, nearly 200 firms, ranging from central banks to algorithmic trading providers and ECNs, have signed statements of commitment to the Code.
Despite the deadline for signing ups passing on 25 May 2018, there are still institutions that are yet to sign up the Code and thus, a long way to go before it achieves widespread adoption.
Spot FX platform, ParFX, was one of the first to sign up to the Global FX Code. The exchange’s principles of transparency, fairness and equality align with those of the Code’s, making signing up a no brainer. Talking to Markets Media, COO Roger Rutherford stated that the Code was the best method to correct the industry’s reputation, “the alternative could have been more regulation which takes time and introduces further costs to the industry. So whilst the market is adjusting to MiFID II, a code of conduct is a better way to bring ethics back into the FX marketplace.”
Moving forward, Rutherford believes institutions shouldn’t immediately be penalised for having not signed up. “For now, an institution could probably make a good case for why they haven’t done so yet because they are waiting for the final details on last look, anonymous trading and cover-and-deal to be decided by the working groups.” However, Rutherford added we can expect to see central banks refusing to do businesses with those who haven’t signed up to the code.
The ACI FMA is a trade association which represents over 9,000 financial markets professionals. The ACI was the first to set an industry standard in the 1970s with its ‘Model Code’, which was retired upon the launch of the FX Global Code last year. As a strong believer in setting an ethical standard, the ACI has supported the launch of the Code with its ELAC portal, an online platform which provides FX professionals with continuous training and certification. It also offers an online version of the FX Global Code Certificate which formally tests an individual’s understanding of the Code’s 55 principles.
Looking beyond the first year of the code, Paul Chappell director of education at the ACI Financial Markets Association, believes the industry has more room for improvement in relation to adoption of the code. “There are elements of the code – particularly around pre-hedging as well as last look – that demand a significant cultural shift and some large market participants have a long way to go in this respect,” he says.
Pragma is one of the leading algorithmic trading technology providers in the FX and equities market. The company recently made headlines with its statement of commitment to the Global FX Code. Pragma believes algorithmic technology lends itself to aiding traders with their transparency requirements, as each transaction is databased and therefore easy to analyse.
A less successful part of the Code is the rate at which buy-side institutions have signed up to the code. “If you look at the public registers, there are certainly fewer buy-side participants that have signed up to the code. I think there is a sense that the code was pointed towards the sell side, because that is where the bad behavior in the FX market was uncovered, therefore the buy side feels less urgency to sign up,” according to Curtis Pfeiffer, Chief Business Officer at Pragma Securities.
Looking forward, Pfeiffer believes that corporate treasurers will have a key role in the success of the Code. “For a corporate treasurer to now commit to the Code sends a public message to its service providers – banks, brokers and vendors – of the behaviour it expects from them. Doing so opens and encourages new ways of doing business, and advocates for greater use of algorithmic trading and TCA [transaction cost analysis].”
What to look for next year
It is clear that the Code is the first step in a long journey the FX market is taking to improve its reputation. To reach full effectiveness there needs to be unanimous adoption across the industry. There will need to be a further push to get market participants such as buy-side and corporate treasurers to commit to the Code. On the other hand, there are aspects of the Code such as last look, anonymous trading and cover-and-deal, that will need to be developed before some institutions commit.
It will be interesting to see how the FX Global Code evolves after its deadline and if, following the outcome of the three working groups, it continues to see the same critical mass it has experienced in the first half of 2018
Leading industry trade publication FX Week has announced the winners of its prestigious e-FX Awards, which included two of Chatsworth’s foreign exchange clients.
The awards recognise firms from across the foreign exchange industry for their excellence and innovation in the world’s most liquid financial market.
Announcing the award winners, FX Week editor Eva Szalay said technology in the market was “booming”, pointing out that “innovation has been extended to small start-ups, as well as the largest players” and highlighted the market’s “genuine desire to become more transparent, more competent and highly innovative”.
Innovation was certainly in evidence from algorithmic trading technology provider Pragma Securities, which was named Best independent algorithmic trading technology provider, and post-trade distributed ledger technology company Cobalt, which was awarded e-FX initiative of the year award.
Reflecting on the increasing sophistication amongst the buy-side and the push for best execution in FX, Pragma has seen rapid growth and expansion over the past 12 months.
The company serves banks, brokers and sophisticated buy-side institutions, and identifies its value proposition around transparency and control as differentiating features.
It added a number of new capabilities to its Pragma360 algorithmic trading platform. This includes algorithmic trading non-deliverable forwards (NDFs), which offers traders better execution when investing in popular emerging market currencies.
It has also expanded its international client base through a new connectivity presence at Equinix’s LD6 data centre in London, providing lower latency connection to London based FX matching engines.
Cobalt has a very eye-catching proposition – it uses distributed ledger technology to cut 80% of the costs of post-trade reporting.
Founded by former Traiana executive Andy Coyne, and Adrian Patten, the company is offering to completely revolutionise the costly and time-consuming way in which post-trade FX services are conducted, cutting out duplication by storing records of all transactions on a single distributed ledger.
“I think if we are successful, the biggest impact will be on trading and Cobalt will increase volumes. Post-trade costs are a tax on trading and the idea that you can charge someone 50 cents to a buck for sending an unencrypted message to the back office is ridiculous.
“So if we can reduce those costs by dollars per transaction, that will feed into increasing volumes,” Patten tells FX Week.
The team at Chatsworth would like to congratulate both Cobalt and Pragma on their well-deserved award wins.
Curtis Pfeiffer, Chief Business Officer at Pragma Securities, explains to FX-MM how corporates could stand to benefit from using algorithms for FX execution.
Why should corporates consider using algorithms for FX execution?
Corporations want to maximise profit, and a penny saved is a penny earned. Algorithmic trading can contribute to the bottom line by significantly reducing FX trading costs. Corporations trade on the order of $70 trillion a year – roughly the same as the total global GDP. On such large amounts, basis points matter.
That’s why, to fulfil their mission, corporate treasurers are increasingly focused on ensuring that they get best execution on their FX transactions, which includes using the best available trading tools and practices.
What advantages do algorithms have over other trading techniques?
With the speed at which trading is conducted today, the proliferation of trading venues, and sheer levels of information that is processed, it is simply impossible for a human trader to stay on top of all the data that the market is generating.
There are four core benefits to algo execution:
- Breaking up a large order into multiple smaller pieces means, on average, paying less than trading in a block
- Building algorithms on top of an aggregated liquidity pool effectively narrows the spreads being traded on
- Building algorithms on top of an aggregated liquidity pool effectively narrows the spreads being traded on
- Algorithms have the ability to provide liquidity as well as to take prices, allowing patient traders to capture part of the bid-offer spread
- Automation frees treasurers and traders to focus more of their time on those issues where human intelligence and judgement add the most value.
What factors should investors consider when choosing an FX algorithm?
First, corporations should understand the bank’s liquidity model for their algorithmic offering – principal, agency or hybrid.
Bank algos access liquidity differently depending on the model. A pure principal algo accesses just the host bank’s liquidity, which also provides indirect access to other liquidity pools in the marketplace. Agency models do not interact with the host bank’s liquidity, but are able to provide liquidity on ECNs as well as taking prices, potentially capturing part of the bid-offer spread for the customer.
Hybrid models can offer the best of both worlds, though customers should understand how the bank manages its dual role as principal and agent. Corporations should assess the liquidity pool underlying each bank’s algorithms to determine which model will be most effective.
Second, corporations should be satisfied that their bank provider has first class algorithmic trading tools – either through a major investment it has made in algorithmic trading research and development internally, or by partnering with an algorithmic technology specialist. Smart algos have sophisticated order placement logic, change their behaviour based on pair and time-specific liquidity patterns, and make intelligent and dynamic use of the real-time liquidity available across venues – for example based on order fulfilment rates.
Provided liquidity and investment checks out, corporations can consider algorithmic trading as another service their banks provide, and direct flow as part of the overall banking relationship.
Finally, best practice is to use TCA after the fact to track performance across bank providers and make sure all is as expected.
To read more, please visit the FX-MM website here.
UK Prime Minister Theresa May finally triggered the formal process for Britain leaving the European Union (EU) on March 29.
While the EU referendum and a post-Brexit scenario may have been something of a blow to confidence in the City, it still has plenty going for it as a financial hub. This year’s Global Financial Centres Index, an international ranking of the world’s leading financial centres, placed London top of the pile.
“London’s rating has been influenced by not knowing what will happen after the UK’s departure [from the EU],” Mark Yeandle, associate director of Z/Yen and author of the report, told The Financial Times. Despite this, London remains top of the list and, over the period which the report tracks, has even recovered some ranking points.
London also remains the world’s biggest FX market by a huge margin, according to the latest BIS Triennial report. While Brexit may result in some jobs being relocated, the industry still believes London will remain front and centre and a key financial hub.
One of the key factors which will insulate London’s FX market is its concentration of trading infrastructure and activity. “When trading becomes concentrated in a particular region and is supported by a comprehensive legal and regulatory environment it develops natural strengths that enable that particular market to function well.” says Dan Marcus, CEO of ParFX, talking to Finance Magnates. “By leaving that pool of liquidity, a firm could disadvantage themselves and their clients.”
This means that, far from vacating the city, many businesses are investing further in London’s future.
Algorithmic trading technology provider Pragma is one such company, with the New York-based firm expanding its equities and FX business to London. “Our investment in the data center at Equinix’s LD6 site offers Pragma360 clients access to state-of-the art technology and the largest ecosystem for foreign exchange trading globally,” says Pragma’s Chief Business Officer, Curtis Pfeiffer.
“Despite the uncertainty caused by Brexit, we are moving forward with this large capital expenditure because London, as the largest FX trading centre in the world, hosts the largest datacentre ecosystem for low-latency FX trading applications and we do not see that changing any time soon,” he explains.
While nothing in the negotiations has been determined at this early stage, the City will also weigh up the potential challenges of Brexit.
Continued access to the European single market through financial passporting and the ability to attract skilled technology professionals from across the EU to work in London top the list for many institutions.
“77% of my staff in London were born outside the UK. We need those people. People are very mobile. I just worry that tough negotiations will send the wrong signal.” Michael Kent, CEO of remittance service Azimo, told Financial News.
In addition, J.P. Morgan has reportedly spent the last nine months weighing up various EU cities as a potential new continental home for their operations, according to The Wall Street Journal.
Looking beyond the headlines, however, the picture is more nuanced. Most of the relocation plans announced over the past few months involve relatively small numbers of staff. For many banks and financial institutions this may be a hedging exercise rather than a wholesale exodus.
Going forward, the UK government is determined to ensure London remains a central part of the international financial landscape, and it’s worth remembering London has a number of strategic advantages which mean it is likely to continue to be the city of choice. It uses the global language of business, English; it is situated in the perfect timezone between Asia and America; and has a legal system that is world-renowned for clarity and reliability.
None of this will change; in fact, it will continue to ensure London remains open and attractive to business.
The decision by Pragma to set up a base in London shows how the UK’s capital remains the natural hub for algorithmic currency trading despite the UK’s looming exit from the European Union.
While the debate about the future of London in a post-Brexit environment continues to rage on, there are many who continue to recognise the role of London at the centre of the USD5 trillion currency market.
Algorithmic trading in particular continues to rise in popularity. A report from Greenwich Associates found that the proportion of volume-weighted FX trading executed algorithmically has increased two and a half times in the past three years.
This trend was further highlighted by Pragma Securities, the multi-asset class provider of algorithmic solutions, which established a new connectivity presence in London to service its growing international client base.
London currently accounts for more than a third of all currency trading activity globally, according to the BIS. In a news article in FX Week, David Mechner, CEO of Pragma, expressed confidence in London and its role at the centre of European and international financial markets.
“Equinix’s LD6 site offers Pragma360 clients access to state-of-the art technology and the largest ecosystem for foreign exchange trading globally.
“The banks we service need state-of-the-art trading capabilities for their traders, and buy-side and corporate clients, making LD6 a natural fit.”
Pragma is not alone in its bullishness on London’s future, and it is clear that maintaining a data centre presence remains crucial to an institution’s trading operations, particularly for FX trading. The Financial Times recently reported on Dutch data centre operator Interxion’s £30m investment in its site in London’s Brick Lane.
Curtis Pfeiffer, Chief Business Officer at Pragma, also highlighted the benefits of proximity to London and risks of leaving London’s FX ecosystem.
“We are moving forward with this large capital expenditure because London, as the largest FX trading centre in the world, hosts the largest datacentre ecosystem for low-latency FX trading applications and we do not see that changing any time soon,” said Curtis.
“Institutions will be reluctant to leave the data centre ecosystem in London, which has increased in size significantly over the last 10 years as a result of a network effect – everyone wants their trading servers to be where everyone else’s are. By leaving that ecosystem, a firm could disadvantage themselves and their clients.”
Multi-asset algorithmic trading provider, Pragma Securities, has launched TradeBase, a relational database that provides clients real-time access to their parent and child FIX order messages for greater transparency to facilitate client risk management, compliance, and monitoring of their algorithmic orders.
TradeBase is populated in real-time, and enables Pragma360 clients to feed their trading, risk management and compliance systems child order level trade data in a manner usually available only to firms who build their own algorithmic trading platform. The database provides a granular level of data including entries of all new child orders, amendments and cancellations, as well as child order fills.
David Mechner, CEO of Pragma Securities, summarises the need for technology providers to deliver clients with tools designed to increase trading transparency throughout the trading lifecycle. “Transparency is at the heart of our value proposition, and TradeBase is the next step in delivering on that value. It provides our clients convenient, real-time access to their trading data so they can incorporate it into their own processes and tools with minimal friction, and can conveniently track their order in detail from their OMS to the street.”
The launch of TradeBase follows the publication of a recent white paper by Pragma Securities exploring a buy-side blind spot in best execution due diligence. The paper, published in Tabb Forum analyses the order routing practices of high-touch trading desks and calls for brokers to demonstrate greater levels of transparency to clients.
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 that 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 behaviour
David Mechner, CEO of Pragma Securities, a multi-asset algorithmic trading provider, analyses growing demand among buy-side institutions for greater transparency around order routing practices and best execution.
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