FX options API trading takes off at quant hedge funds

In the fast-paced world of spot foreign exchange trading, dealers send a constant stream of prices to some of the most active market participants directly. And in most cases, clients secure the best prices by going directly to a dealer instead of using a multi-bank platform.

Direct application programming interface (API) price streams have been readily adopted in the spot FX world due to that market’s electronic sophistication. But dealers are now seeing certain sophisticated hedge funds seeking direct price streams for vanilla FX options.

These firms can then knit together the various price streams they receive from their banks via request-for-stream, either through internally developed aggregators or third-party vendor software, dramatically reducing execution times from several minutes to seconds.

We’ve grown everywhere, but a lot of the growth has come from the direct API section

Joe Nash, BNP Paribas

“We operate our own proprietary system that links up to the bank’s APIs. We like it because we don’t get lumped into the predatory flow on the platforms, and can maintain direct FX options trading relationships with the banks,” says an FX derivatives trader at a UK-based systematic hedge fund.

Data from BGC’s Expand Research shows direct API flows for electronically traded FX options between dealers and clients grew 55% in 2025 compared with 2024. In comparison, the overall market – excluding trades executed by single-dealer platforms (SDPs) and direct APIs – grew by 22% over the same period.

Joe Nash, head of global macro digital at BNP Paribas, says the bank has seen its electronic FX options volumes jump 700% between the beginning of 2023 and mid-2025. Around a fifth of that increase is from direct API trading.

“We’ve grown everywhere, but a lot of the growth has come from the direct API section,” says Nash.

He adds that the bank recently revamped its API offering to support direct trading of more options products with maturities out to two years.

Stream-ability

Bilateral streaming relationships have become an important way for liquidity providers to quietly move axes without alerting the wider market or paying brokerage fees on the multi-dealer platforms.

Clients can connect to a bank’s FIX API via their order management systems. The most enthusiastic users of streaming have been systematic hedge funds, who prize speed of execution over the minimal price improvements they can make through a lengthy request-for-quote (RFQ) process.

In FX spot, banks can provide continuous price updates in near real-time. FX options, however, can be highly bespoke structures, which often require a voice trader to factor second and third-order Greeks into their prices.

But quantitative hedge fund clients are driving their dealers to automate their FX options pricing models, which allows them to develop algorithmic trading strategies that have served them well in other FX instruments.

“Quant funds want streamable options pricing – they don’t want RFQ – because they will be trading at volume and scale. They have the technological skillset to build their own price aggregation model that can be plugged directly into their LPs, and they don’t have to pay a software licence or maintenance fee to a third-party vendor,” says Nash.

Furthermore, funds that are accustomed to trading listed FX options on the CME want to extend these functions to the over-the-counter market, where they can access liquidity for a greater range of instruments and tenors.

Third-party vendors such as smartTrade Technologies and Portware offer various solutions, allowing asset managers and macro hedge funds to access aggregated real-time pricing from banks, with users paying fixed fees to the vendors instead of size-based fees to an execution venue. But this is different to a multi-dealer platform such as Digital Vega, which would offer price aggregation for free but charge brokerage for execution.

“For the buy side, the question is what is the actual cost to set up and have all the routing logic to trade directly? And then compare that to how long it takes to connect to us and trade with the Street,” says Mark Suter, founder of Digital Vega.

“Its limited integration work via a single API and the development is done by us providing direct access to 22 market-makers.”

In FX, there is generally a move away from brokerage-paid platforms because there is always going to be that inherent cost to trade

Joe Nash, BNP Paribas

However, other buy-side firms, such as JP Morgan Asset Management, have built their own hubs to bilaterally trade with dealers across cash and FX derivatives via API. While building an in-house solution can require high initial spend and rack-up high maintenance costs, BNP Paribas’s Nash says it does offer longer-term benefits.

“The higher initial spend from an IT point of view is to build yourself, but then you’re not paying your software licence fees or technology vendor to keep maintaining that service going forward. It’s a case of scale, [and] if you are trading at scale for the foreseeable future, then you might want to do that,” he says.

Vendors could also be limited to what they can offer through the API, and any technology issues could impact the trade.

Nash adds that buy-side firms choosing to trade directly with a dealer over an API would often receive a better price than if they were to execute on a platform where brokerage fees are increasingly factored into the spread.

“If you want our best price, you go direct. In FX, there is generally a move away from brokerage-paid platforms because there is always going to be that inherent cost to trade. Therefore, if you are trading at scale and volume long-term, you are probably better off building your own direct connection to your LPs,” adds Nash.

Not for all

However, not all dealers see direct API trading as a solution for everyone, and insist most volumes still come through an SDP.

“We’re happy to connect with clients in whatever way works best, and API is one such method. However, we don’t see it as a universal solution. It can be quite demanding on infrastructure, requires significant investment, and sacrifices some convenience compared to an SDP,” says Pierre Jonathan, head of eFX automated market-making at JP Morgan.

He suggests that not all direct API-based trading is completely automated from the market-maker’s perspective. For instance, if there is a price request during an illiquid time of the day, there is room for the voice trader to step in.

“API doesn’t necessarily mean streaming firm liquidity at all times. It can also mean request-for-stream, and if it’s a large size during an illiquid time of day, we might route that directly to manual pricing by the desk,” he says.

Digital Vega’s Suter says there are also limitations on the data banks can attain by trading over direct APIs, rather than on an MDP.

“One of the things the banks want is to benchmark their pricing and market share in real-time. If they’re missing trades on certain clients, maybe it’s because they’re too slow or they are not skewing enough. And if it’s over a direct API, there’s no efficient way to get all that data and use it to benchmark and adjust your pricing,” he says.

“That being said, if a client were to approach us, we would be open to looking at licensing the service and providing a dedicated, standalone solution.”

Editing by Lukas Becker