Algorithms from banks now very welcome at Thomson Reuters, and are accessible via a new dealing platform. This could be the solution to liquidity providers difficulties in obtaining credit from Tier 1 banks.

Algorithmic trading has long been very central to North Americas institutional and proprietary desks that operate en masse in Chicago and New York. As much as a central fixture to the two major institutional financial centers as this is, it has always been the preserve of said proprietary desks on an almost exclusive basis.

Banks, however have often had their own internal algorithms restricted to use by their own FX and derivatives desks, interaction with non-bank electronic communication networks (ECNs) and specialist institutional venues having been restricted with good reason. Ergo, non-bank ECNs and primes have not been privy to bank algos without a prime having to establish a direct relationship with a bank and adhere to its strict terms, if this is even offered at all.

Now, Thomson Reuters, which acquired one of the worlds most dominant ECNs FXall in 2012 for $625 million, bringing with it FXalls CEO Phil Weisberg to run Thomson Reuters Global FX division, has opened up access to bank algorithms with a new platform that aggregates FXall QuickTrade which is the firms request for stream service, along with Bank Stream which continuously streams prices, and the firms central order and limit books along with the conventional dealing platform.

The new single desktop solution that combines these elements is called FX Trading and according to Phil Weisberg brings together access to all of Thomson Reuters venues liquidity on one screen which means that a segment of our customers will for the first time have access to bank algos that were previously unavailable to them.

This solves some of the difficulties associated with having to continually maintain direct relationships with banks for FX brokerages and primes, at a time during which credit is being restricted dramatically by banks and reluctance to take counterparty risk is at an all time high.

It is possible that this new evolution may release some clients from a house bank trading mentality, bringing them access to the enlarged pool of liquidity and algos that are now within accessible reach of firms that no longer have to access direct bank liquidity.

Photograph: Thomson Reuters, Bank Street, London E14. Copyright FinanceFeeds

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Im still lost as to how this solves the credit problem. Are brokers and professional traders now able to access credit via Reuters FxAll platform?

In some respects yes. It is a good solution for firms to connect to non-bank ECNs and to be able to access liquidity across multi-ECNs. Of course, the upshot of this of course ultimately is that it is the same liquidity that is being accessed across all platforms, but the reality is that most ECNs will provide specific terms to specific brokers and will have slightly different relationships with the banks therefore the ability to aggregate in this way means that best execution can be achieved by brokers while the ECNs connect to the venues and banks accordingly. It of course is less ideal than having direct PB relationships with tier 1 banks but in these days of restricted credit and the need to have a massive captial base it is a solution

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