Currency Algo Trading Climbs for Investors on Integral's System

(Bloomberg) -- Money managers are ramping up their use of algorithmic trading in one corner of the $5.1-trillion-a-day currency market.

On Integral Development Corp.’s currency-trading platform, investors nearly quadrupled their use of the company’s algorithmic strategies to a record in the first quarter relative to a year earlier, according to the Palo Alto, California-based firm. More than half of asset managers’ currency volumes last quarter on the system were executed via Integral algos, said the company. Banks and brokers also use the $45-billion-a-day platform.

“Algos can minimize the direct and indirect costs of trading,” said Vikas Srivastava, managing director of business development at Integral and former head of e-commerce for Citigroup Inc.’s fixed-income division. “It’s a way to combine the speed and power of a computer with the expertise of a human trader.”

These strategies are gaining popularity in currencies because they allow investors to automate orders based on factors including price, timing and liquidity. The programs can also be used to break orders into smaller chunks, find the cheapest prices across multiple trading venues or to reduce the market impact of transactions.

And with the foreign-exchange industry still trying to shake off a rigging scandal that prompted billions of dollars in fines, the data from electronic transactions can be shown to regulators or stakeholders to demonstrate traders are trying to get the best deal.

“You can have a better audit trail,” said Javier Paz, a senior analyst at consultant Aite Group. “With the algo, you know what type of execution you’re getting and you can let it run based on market conditions and your goals. You know what the rules are.”

Investors turning to Integral’s platform can choose among the company’s algos and those provided by banks. Total use of Integral’s algos across its client base surged 68 percent in 2016. The company was founded in 1993.

To contact the reporter on this story: Lananh Nguyen in New York at lnguyen35@bloomberg.net.

To contact the editors responsible for this story: Boris Korby at bkorby1@bloomberg.net, Mark Tannenbaum

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