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Executive Summary

More than eight in ten hedge funds trade FX electronically, though demand for e-trading is effectively universal among the most active users. Excluding two large outliers, the proportion of total hedge fund volume traded online increased from 71% to 76%.

Graphic slides include:

  • More than eight in ten hedge funds trade FX online (stable) and now execute 76% of their volume electronically
  • Demand for e-trading remains nearly universal among the most active hedge funds and has sustained similar levels to last year with smaller volume accounts
  • Demand for electronic execution has slightly increased in Asia Pacific, while levels in the Americas and Europe remain consistent
  • Eight in ten hedge funds trade electronically - stable from last year but meaningfully higher than the levels from 2007-2011
  • One in four hedge funds that trade online use algorithmic-based execution tools – a modest increase from last year
  • Hedge funds and banks report an increase in the proportion of their volume traded electronically
  • One in four hedge fund currency options users trade these instruments electronically
  • More than one half of NDF users trade these instruments electronically
  • Hedge funds are less inclined to use multi-dealer platforms, relative to other financials
  • Demand for single-dealer sites is much higher than for multi-dealer platforms in Asia Pacific
  • Most Important Factors for Prioritizing Single-Dealer E-Trading Platforms, cont’d
  • Less than one in six hedge funds report using direct-to-dealer APIs
  • On average, hedge funds trading electronically now execute a higher proportion of their volume on multi-dealer platforms
  • About one in three hedge funds trading online expect to use multi-dealer
  • FXall continues to be the most widely used multi-dealer platform
  • J.P. Morgan (gaining) is now the dealer used most actively on third-party systems
  • Barclays has the most widely-used single-dealer platform, followed closely by Citi gaining
  • More than one in three hedge funds use Transaction Cost Analysis, with the most active traders continuing to have the strongest demand
  • Across geographies, demand for TCA has increased
  • Most hedge funds using TCA continue to utilize proprietary tools, though more report using broker-provided offerings this year
Methodology

Greenwich Associates interviewed individuals responsible for foreign exchange trading at 1,612 top-tier financial institutions and corporations globally, including 192 Hedge Funds and CTAs. Interviews were conducted in face-to-face meetings or by telephone.