Written by: Luqman-nul Hakim B M Lukman, Justin Yeo Shui Ming

Abstract: In “Flash Boys: A Wall Street Revolt”, Lewis wrote “The market is rigged” by HFT traders who front run orders placed by investors. Indeed, if makers cannot win by getting a good price, they will win by speed. In this paper, we focus on the foreign exchange market. Although they are OTC markets where each brokers managed their inventory separately and as such each quoting a slightly different bid-ask spread, an emerging trend is that more brokers are providing ECN accounts for retail investors. Users of ECN accounts receive their pricing from a pool of large liquidity providers and hence there are smaller price discrepancies. That said, we are not just trading with other retail traders but also dealers from banks who provide these liquidity. They make a market with an advantage of being fast and access to the market depth of their clients. Building a trading bot will increase the speed and accuracy of our trade execution and hence, enhance our chance of survival in the competitive world of trading.

See the full report here.