The algorithm method

Algorithmic trading was once the preserve of the equity market, but is winding its way into foreign exchange trading. However, some question whether these services can be properly provided by dealers acting as principal. By John Ferry

The names sound as if they have been taken from a spy novel. ‘Guerrilla’, ‘sniper‘ and ‘iceberg’ are just some of the terms traders have come up with to describe algorithmic trading techniques. Algo trading purports to somehow enhance execution of transactions, either by getting a better deal for the customer or by dampening the trader’s footprint in the market – ‘iceberging’, for example, involves slicing a large share order into smaller sizes to hide it from the rest of the market.

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