Episode 6 explores the evolution of FX execution from voice-based relationship trading to sophisticated electronic and algorithmic methods. David Axtell draws on 35 years of experience to explain when each execution channel makes sense and how to choose strategically.

The episode covers voice trading's continued relevance for large trades (£50M+), complex structures, and stressed markets where electronic quotes disappear. Single-dealer platforms offer relationship-based pricing with comprehensive product coverage but sacrifice competitive tension. Multi-dealer platforms provide price competition that typically saves 2-4 pips through simultaneous quote comparison from 8-15 banks.

David explains ECNs (Electronic Communication Networks) like EBS and Reuters Matching, algorithmic execution strategies including TWAP and VWAP, and high-frequency trading firms that now account for 15-20% of major pair volume. Real examples include his strategic approach to converting Saudi riyal receivables—using electronic platforms for routine $5M trades but voice relationships for a one-off $50M transaction that required negotiation.

The episode concludes with a framework for execution method selection based on trade size, currency pair liquidity, time flexibility, and market conditions. Transaction cost analysis (TCA) receives practical coverage showing how to measure execution quality and drive systematic improvement.

By the end of this episode, you will be able to:

1. Distinguish between voice, single-dealer, multi-dealer, ECN, and algorithmic execution methods

2. Select appropriate execution channels based on trade size, currency pair, and market conditions

3. Understand when relationship-based voice trading outperforms competitive electronic platforms

4. Recognize how algorithms minimize market impact for large orders

5. Apply transaction cost analysis principles to measure and improve execution quality

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Episode 7: "Transaction Costs: What You're Really Paying"

- Spreads beyond the visible bid-offer

- Market impact for different trade sizes

- Timing costs and opportunity costs

- Measuring total transaction costs

- Building realistic execution expectations

Follow us on thetradingfloor.rondanini.com and look at our minimanuals site learn.rondanini.com where you will find everything you need to learn about FX and other asset classes

Luigi Rondanini takes over the mic to reveal Season One's roadmap: 18 episodes covering spot, forwards, swaps, and NDFs. Behind-the-scenes challenges of producing across 8 time zones, plus a teaser about a Riyadh story David doesn't know yet.

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Episode 6: Transaction Costs - David Axtell returns to explain how to measure what you're really paying when executing FX trades. Explicit costs, hidden costs, total cost of execution. Critical practical knowledge for anyone trading FX.

Episode 5 begins Part II: Spot FX with comprehensive coverage of how spot transactions actually work from trade agreement to final settlement. David Axtell draws on decades running treasury operations to explain the mechanics that underpin seven and a half trillion dollars of daily FX trading.

The episode explains why spot settlement takes two business days (T+2) rather than being immediate, covering historical context from the telex era through modern electronic systems. Value date calculations receive detailed treatment including business day rules, holiday adjustments in both currencies, and complications from Middle Eastern Friday-Saturday weekends versus Western Saturday-Sunday weekends.

David walks through the complete settlement flow: confirmation generation, payment instruction transmission to operations teams, movement through domestic payment systems (Fedwire for dollars, TARGET2 for euros, BOJ-NET for yen), and the critical timing around cut-off deadlines. The 1974 Herstatt Bank failure provides historical context for settlement risk—banks had paid Deutsche marks to Herstatt but never received promised dollars when German regulators closed the bank mid-settlement cycle.

CLS (Continuous Linked Settlement) solved this principal risk through payment-versus-payment mechanisms across eighteen major currencies, processing over six trillion dollars daily during a seven-to-noon Central European Time window when all relevant payment systems operate simultaneously. The episode concludes with market session analysis showing how liquidity varies across Asian (quiet), European (building), and London-New York overlap (peak) sessions, plus introduction to the learn.rondanini.com education platform.

The Trading Floor with David Axtell