Clients pay a price for transparency

Until now, for the most part the use of algorithmic execution in foreign exchange has been limited to a small pool of technologically savvy hedge funds, commodity trading advisers and banks. This minority group has been able to source the data, particularly from internal flows, to write their own models.

But as more banks begin leveraging the business opportunity presented by an extension of these models to clients, so too comes demand for more data to expand their offering. This is particularly true if one acknowledges that many of the algorithms banks are currently offering clients were first used to trade equities.

Some of the new strategies Credit Suisse plans to roll out to clients, for example, were originally built for equities and are based around fixings and volume data. Naturally, they are pretty difficult to develop and adapt for use in FX without volume data for FX.

However, this is not to say platforms haven't become more transparent over the past few years. A growing number of electronic communications networks have offshoot data arms. For example, a major part of FXall's pitch when marketing its year-old electronic communications network Accelor was its market data service, Accelerate, which provides three levels of market data. Its service includes full depth of book, completed trade information and historical information.

The platform says participants trading through the user interface can view up to 15 levels of market data without paying a surcharge. This sounds like a reasonable deal, although of course it is dependent on exactly how much data is actually being generated.

The volume of data would depend on how much trading activity there is on the platform by users, which raises a few questions. Ultimately, if a client is trading on a platform and so contributing towards establishing the data, and already paying some form of brokerage to do so, is it fair to then also expect them to pay to receive that data at some point?