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EUR/USD: Tracking Institutional Participation and Aggressive HFT Activity Helps Predict the Next Day’s Currency Return

By Irene Aldridge

Over the last 20 years, massive technology changes have swept through Wall Street, taking over a large proportion of activity. Remarkably, institutional as well as retail and corporate investors largely absorbed technology into their toolkits as means of faster, more reliable execution, for example. The short-term intraday arbitrageurs, however, have largely been replaced by technology altogether by a class of automated trading strategies, collectively known as high-frequency trading.

Imagine you could trade with insight about how institutions are placing their bets or where aggressive HFT is present. Wouldn’t predictive tools such as these help you?

Each class of market actor imprints their own trace on intraday market activity and impacts the markets in its own way. AbleMarkets is the first microstructure and Big Data analytics firm to estimate the activity of institutional and aggressive high-frequency traders intraday, by measuring their activity in the limit order books. The estimates AbleMarkets develops can be highly predictive of impending market activity, both intraday and one or more days ahead.

Take, for example, EUR/USD, one of the most traded financial instruments in the world. Its daily trading volume routinely exceeds US $500 Billion (source:, rendering it a very liquid and easy-to-trade currency for various applications. In comparison, the average daily July 2018 volume in the U.S. equities across all the exchanges was only just over $1 Billion, according to FINRA (source:

The daily institutional activity in EUR/USD is itself very predictive of the currency’s next day’s return. The primary reason for institutional predictability is the sheer scope of the institutional activity. When a large institution decides to make a trade, it typically executes a large transaction on the order of USD millions in equities and tens and hundreds of millions in currencies. Such trades require time to seamlessly “massage” into the market and often last more than one day. Hence, today’s institutional activity is often followed by same-direction institutional activity tomorrow and can be capitalized upon in trading. The aggressive HFT activity is more short-term, but together with the institutional activity creates solid next day’s predictability, as shown in Figure 1.

Figure 1. Performance of next day’s EUR/USD based on AbleMarkets Daily Institutional Investor Activity Index and AbleMarkets Daily Aggressive HFT Index.


How is the institutional activity measured by AbleMarkets? The institutional buy volume is a proportion of the total volume of all the buyer-initiated trades. In other words, all the executed trades (not limit orders) that were initiated with a market buy order count as a total buyer-initiated volume. The buy institutional participation is then the proportion of those buyer-initiated trades that were initiated by an institution. Similarly, the sell institutional volume is the proportion of all the trades initiated by a market sell order that were placed on behalf of institutions.

The sum of institutional buy and institutional sell does not necessarily add up to 100% because the proportions are measuring different items: if there were 10 buyer-initiated trades x $100,000 shares each in the past 1/2 hour, then the total buyer-initiated volume is $1,000,000. If,
out of the $1,000,000, the institutions placed 6 orders x $100,000, then the institutional participation is 60%. At the same time, the total seller-initiated volume for the same 30 minutes could have been 5 seller-initiated trades x $150,000 each = $750,000. If the institutions placed 3 of the 5 seller-initiated trades, then the institutional sell participation is also 60% = 3/5.

Aggressive HFT is generally not practiced by institutions, although some institutions may deploy it as part of their executions. While Aggressive HFT and Institutional participation may overlap slightly, generally they are different indicators. You can subscribe to the Aggressive HFT separately: . Each daily index is streamed for only $35 per month, for a limited time.

To receive the daily data, one may choose to sign up to charts and/or to an FTP feed with text tables at no additional cost. The daily values are released at 3:55 PM ET, leaving 5 minutes to execute a trade, if desired. The FTP service allows clients to grab the data automatically from our servers and feed it directly into their own execution algorithms, saving time in the process. Those who prefer an even more detailed breakdown of activity, may choose the intraday index instead. When receiving the intraday index, the clients are able to make their own aggregates intraday rather than waiting for our system to spit out the end-of-day number. The intraday data is distributed every 20 minutes for the Aggressive HFT index and every 30 minutes for the Institutional Activity Index.

AbleMarkets tracks aggressive HFT activity and institutional participation across a range of financial instruments, including the U.S. equities, ETFs, futures, currencies and even major European equity indices like EUROSTOXX20.

To subscribe to data, please visit or email Irene Aldridge is Managing Director, Research, of AbleMarkets. She is author of High-Frequency Trading: A Practical Guide to Algorithmic Strategies and Trading Systems (2nd edition, Wiley, 2013) and Real-Time Risk: What Investors Should Know About Fintech, High-Frequency Trading and Flash Crashes (Wiley, 2017).


DISCLAIMER: The research and opinions presented herein are for informational purposes only. AbleMarkets expressly disclaims all liability related to the gains or losses resulting from the application of the research in trading.