Comparative analysis of Back to Back vs Dark Pool STP execution models in OTC Markets
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Keywords
Retail Forex ; Market risk ; OTC ; Value at risκ ; LiquidityAbstract
The aim of this thesis is to present and compare two different models of handling trading flow in OTC Forex retail Market. I will present and describe two discrete Straight Through Processing (STP) models that retail aggregators or brokers use to handle retail client trading flow via two different variations. A back-to-back approach, where all trading flow is externalized to the market via associated liquidity providers and an Own Liquidity model where the firm acts as the primary liquidity pool and operates as principal counterparty in all transactions
Initially we will present an overview of currency markets microstructure as well as describe some real-world systems. Then we will present the retail forex market microstructure, participants as well as how it is linked to the interbank market. Later on, we will compare the two models in three segments. At first, we will examine how and why each model affects execution time and how this is related with market volatility and price discovery.
Then we will compare the two models, based on the available data, n terms of speed of execution, best execution in price terms and finally we will measure daily market risk exposure in each model using the analytic or parametric Value at Risk methodology and examine any relationship with the retail client’s profit/loss performance.
Postgraduate Studies Programme
Χρηματοοικονομική και Τραπεζική με ειδίκευση στις Χρηματοδοτήσεις και Επενδύσεις - Finance and InvestmentsDepartment
Σχολή Χρηματοοικονομικής και Στατιστικής. Τμήμα Χρηματοοικονομικής και Τραπεζικής ΔιοικητικήςNumber of pages
51Language
English
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Αναφορά Δημιουργού-Μη Εμπορική Χρήση-Όχι Παράγωγα Έργα 3.0 Ελλάδα
Αναφορά Δημιουργού-Μη Εμπορική Χρήση-Όχι Παράγωγα Έργα 3.0 Ελλάδα