Maximising Fill Ratios in FX Markets with Latency, Volatility and Model Ambiguity

We analyse how latency affects the strategies of foreign exchange (FX) traders that send liquidity taking orders to the FX electronic exchange. Latency affects the prices and fill ratios obtained by traders. In this paper we... [ view full abstract ]

We analyse how latency affects the strategies of foreign exchange (FX) traders that send liquidity taking orders to the FX electronic exchange. Latency affects the prices and fill ratios obtained by traders. In this paper we assume that traders send marketable orders with a price limit, targeting a desired fill ratio (FR).  We develop a model that maximizes FR whilst minimising how deep the marketable orders can walk the FX exchange's limit order book, we also consider model ambiguity. We solve in close form and employ a proprietary data set to show the performance of our proposed dynamic trading strategy.