High Frequency Traders Elbow Their Way Into the Currency Markets

High-speed electronic market making, already widespread in stocks, is getting a grudging welcome from currency markets. They don’t have much choice.

Algorithmic traders have more than tripled foreign-exchange volumes over the last three years, seizing opportunities as Wall Street banks withdraw from currency dealing, according to Aite Group, a consultant in Boston. The new group of market makers is trading almost $200 billion a day. While that may seem small in the context of the sprawling global currency market, consider this for perspective: Stock trading on all U.S. exchanges totals about $270 billion a day.

From Citadel Securities LLC, which boosted foreign-exchange volumes 83 percent in the first half, to Global Trading Systems LLC, which has tripled activity since the U.K.’s Brexit decision, to Jump Trading LLC, which says it plans to expand its direct market making, nonbanks are racing to provide more currency liquidity.

“Market participants can keep the status quo and remain in the past or they can choose to evolve, roll with the punches and get with the times,” said Sara Wardell-Smith, global head of foreign-exchange trading and sales at Wells Fargo & Co. in San Francisco. “As long as the pricing, service and capabilities are there, why wouldn’t we consider these alternative liquidity outlets?”

Link: High Frequency Traders Elbow Their Way Into the Currency Markets