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Optimizing Workflows With a Spectrum of FX Automation Options

When it comes to FX automation solutions, one size does not fit all, but firms can find the right mix for their own FX programs.

Foreign exchange has come a long way from fax machines and a one-size-fits-all product offering. Today, it has evolved into a technology-driven, strategic consideration for institutional investors, centered around a variety of options, from individualized solutions to fully outsourced programs.

But as FX moves into a more digitalized realm and options proliferate, asset managers and self-managed asset owners will have to determine which technology options are right for their program. As managers and owners have sought out solutions, they face opportunities to automate their FX activities and witness the payoffs.

The Spectrum of FX automation

One of the largest trends we have seen over the last year is managers’ and owners’ drive to simplify their FX workflows. There are multiple tools and levels of FX automation that make up the spectrum of options to help them do so, depending on their needs and operations.

  • Individual tools – The first step in automating asset managers’ and asset owners’ FX operations starts at a high level, reviewing portfolios and individual mandates and seeing which ones may be suitable for a passive FX workflow solution, supporting a rules-based automated process. Examples of automating individual FX elements include helping to define the netting windows and times of execution across the full workflow to deliver efficiency and consistency while minimizing human intervention and operational risks. Another example includes drilling deeper into the execution layer by adopting trading algorithms to augment the execution component and automate lower value tasks, freeing up their trading desk to focus on higher value activities and orders. As a natural progression along this spectrum of automation, firms may also benefit from creating custom algorithms and partnering with a service provider to design algorithmic tools which mimic the specific actions of manual traders. This level of commitment and attention to specific execution goals should provide comfort to asset managers and asset owners who view trade automation more skeptically and fear they may be losing some control of the process as they automate.
  • Component workflow tools – For managers and owners who seek an FX approach that moves beyond the first foray into automation, bespoke component solutions can be a natural next step. Examples of this could include peripheral FX activity such as subscription and redemption flows as well as restricted markets which are often an afterthought from an automated execution and workflow perspective. Such solutions can take on elements such as netting subscription and redemption flows with FX security trading to increase efficiencies and maximize netting benefit. Looking at how FX is supported from an automated standpoint as a whole allows you to incorporate these types of flows. This should reduce transaction costs and create more consistency in terms of execution. For example, when it comes to trading in restricted markets, managers and owners may find that full outsourcing of this portion of their FX strategy can provide consistency to aspects of FX management that bring their own unique challenges and yet are often left out of automation and workflow efficiency considerations. Adding in an automated solution for supported restricted markets can be a natural next step to bring greater levels of automation to an organization. Another case for component workflows includes currency management. Currency management may present an opportunity for firms seeking to take the next step in workflow automation. With more initiative placed on the platform throughout the currency management workflow, the firm can benefit from eased administrative burdens and supported distribution strategies. Asset managers and asset owners alike require increased levels of governance, oversight and transparency combined with the ability to respond quickly to market events. Managing volatility throughout the currency management lifecycle is central to successful performance outcomes, and automation can be a key tool in helping managers and owners do so.
  • Comprehensive outsourced solutions – At the other end of the spectrum, firms could seek out a completely outsourced solution with total automation of their FX needs. Going to the furthest end of the automation spectrum serves to minimize FX risks through comprehensive rules-based netting, including securities funding, income/dividend repatriation, expanding to foreign subscription and redemption flows, and to maximize distribution through the support of expanded share class and look through hedging mandates. Outsourced FX programs are attractive particularly because they free up time for managers and owners and allow them to cut costs, increase efficiencies, reduce risk to their programs, and ultimately focus on their core goal of creating alpha. In addition to these benefits, an automated, straight-through process can provide managers and owners with better benchmarking and transparency into trade execution. As managers’ and owners’ FX preferences and approaches continue to evolve, the demand for full outsourcing is expected to grow. A recent report from Northern Trust indicated that 32% of asset managers are considering outsourcing FX operations in the next two years.1

Finding the right degree of FX automation

Different firms will have different needs when it comes to their FX solution, and one size does not fit all. However, at this point in our industry, it’s likely that some degree of automation benefit firms looking to optimize their FX workflows.

As firms identify the right mix of automation for their own FX programs, it’s important to remember that there is a full landscape of partner and vendor infrastructure and platforms. Covering their FX automation needs through a partner’s service and technology is often far more efficient than building from the ground up. Maintaining automated solutions internally requires a considerable time commitment and a large degree of resources, with an arduous scale-up process particularly when contrasted against plugging into an existing provider’s system.

Automation is making its mark on the FX space, and its influence will continue to grow. To achieve operational excellence, investors should select FX partners that can offer the needed technology alongside the expertise that will guide them through the process of digitizing, automating and optimizing their FX operations.


1 Northern Trust, “Driving Growth in Asset Management”, 2020.


This marketing communication is issued and approved for distribution in the United Kingdom and European Economic Area by The Northern Trust Company, London Branch (‘TNTC’) or Northern Trust Global Services SE (‘NTGS SE’). TNTC is authorised and regulated by the Federal Reserve Board; authorised by the Prudential Regulation Authority; subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. NTGS SE is authorised by the European Central Bank and subject to the prudential supervision of the European Central Bank and the Luxembourg Commission de Surveillance du Secteur Financier. View full disclaimer.


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