Foreign exchange: The linchpin between asset classes - The TRADE

This article profiles Toby Baker, head of foreign exchange trading at T. Rowe Price, who shares insights from his 24-year career journey and perspective on FX trading operations.

Baker caught the trading bug at 14 during work experience at the London Stock Exchange and built his career through various settlements and middle-office roles before joining T. Rowe Price. He emphasizes foreign exchange as the crucial linchpin connecting equity and fixed income markets, enabling international asset purchases. His team employs a mixed execution approach using both high-touch algorithmic trading and automated no-touch processes to optimize alpha generation for clients.

• Baker advocates for diverse counterparty relationships to navigate market volatility and regulatory constraints, particularly important given Basel III restrictions on bank balance sheets
• T. Rowe Price differentiates itself by collateralizing FX forwards and swaps, providing pricing advantages during volatile periods like recent tariff announcements
• The firm leverages transaction cost analysis and machine learning to optimize counterparty selection and improve upstream decision-making processes
• Baker identifies instantaneous settlement via blockchain technology as the next major innovation, following the industry's move toward T+1 settlement cycles