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    Quants tell FX dealers how to make the most of passive liquidity

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    Hedge funds are being given new ways to act as indirect liquidity providers in FX markets by placing passive resting orders against banks’ internal liquidity pools. How dealers should then make use of such orders, though, presents a complicated question.

    In a December paper, quants at HSBC and Imperial College London give an answer. The group worked out the optimal strategy for market-makers utilising passive liquidity, both to meet their risk management objectives when facilitating these

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