This article was written by FX Markets and is licensed by Bloomberg.
Corporates are perhaps the most risk-averse FX market participants. They tend to engage with the market on a sporadic basis, many either at month- or quarter-end. To minimise risk, they veer towards hedging a high proportion of their FX exposure, which they recalibrate with a similar frequency. Voice trading continues to be used by an overwhelming majority of corporates.
Companies tend to rely on external sources for advice on how best to manage their FX execution, hedging and outlook on FX markets, particularly from banks. They prefer engaging in a full banking relationship and access to a suite of services ranging from treasury management to FX trade execution. The cost of execution is their top priority regardless of execution style, and they are mistrustful of algorithms.
Yet, despite their reserved interaction with the FX market, corporates have widely accepted electronic trading and express a willingness to be more active in the market to take advantage of market conditions to their benefit. While algos and automation are largely shunned, corporates are conscious of the benefits they offer and are expected to increase their use in the years to come.