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High-Frequency FX Trading Proves Its Worth

In a year which has seen poor returns from most quantitative currency fund managers, those running high-frequency trading models have seen their strategy vindicated.

In a year which has seen poor returns from most quantitative currency fund managers, those running high-frequency trading models have seen their strategy vindicated. Sam Gover, manager of a high-frequency fund at IKOS Partners in London, said, "Our trend-following model was worst hit, carry trading was about flat, but high-frequency has made money."

High-frequency strategies involve continuous trading in the foreign exchange markets and are often seen as expensive and technically demanding. Improvements in data availability and electronic trading, however, are wearing away these barriers to entry, according to fund managers. Paul Phelan, director of Quay Capital, noted increased liquidity in the market due to the use of electronic trading platforms has helped high-frequency funds. Officials agreed the number of these funds is likely to grow as electronic trading continues to advance. Jessica James, director in the risk advisory group at Citigroup in London, added, "Models which trade several times in a day are the least explored part of the market."

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