Algos make market thinner, but not less liquid – BIS
Trading robots change market microstructure, central banks conclude; new liquidity metrics may be needed
The growing popularity of execution algorithms is resulting in thinner foreign exchange markets – but is not hurting liquidity – according to a new study from the Bank for International Settlements. New ways of measuring liquidity may be needed as a result.
Published today (October 30), the study is the work of participants from 22 central banks and draws on a survey of 70 market participants. Although it describes the growth of algos as a “net positive” for FX, it also identifies new risks –
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