ANZ developing FX algo suite enhancements

ANZ’s unique liquidity profile and client base have helped to shape its Client Algo and TCA offering. David Thorne, Head of eFX Trading in EMEA and Joel Marsden, eFX Senior Currency Trader, explain the plans ANZ has in the pipeline to further develop the FX algo suite.

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David Thorne

The main driver behind ANZ’s FX algo offering has always been the unique liquidity the bank is able to offer, says Thorne. “While most algos are really based around a TWAP-style execution, the benefit of the ANZ Client Algo is really about access to our liquidity,” he adds. As a result of client interest in accessing this franchise liquidity using algos, Thorne says the team has started development on a new Dynamic Algo. “This strategy will be smarter than a standard TWAP and will feature the ability to better gauge liquidity,” he explains. “This enables clients to speed up or slow down the execution as required and so reduces the risk of market impact.” Also driven by client feedback, the team will introduce new functionality to pause/amend and then resume the algo mid-flight, enabling clients to have even greater control of their algo executions.

ANZ has also been working on key enhancements to the TCA offering, particularly around capturing the right risk price. “We’ve made that risk price more time zone specific, which improves the level of accuracy for our clients,” says Thorne. “We’re trying to get it as accurate as we can so that clients can really understand what they’re saving by doing an algorithmic execution.” According to Marsden, the ability to access tier one bank liquidity aggregated from all the major banks is a further key differentiator which sets ANZ algos apart from other offerings. He adds that this also enables algo users to benefit from tighter spreads, greater control and their orders being less visible to the market. “Additionally, our algos are tested by ourselves first,” Marsden adds. “ANZ boasts a significant market making business and the algos are just exposing the way we hedge internally, then making that ability to capture spread available to our customers as well.” Marsden notes that ANZ also enjoys unique flows with approximately 50% of its business taking place in the Asia-Pacific time zone, as compared to 15% for FX globally.

Joel Marsden

The changes seen over the past year with more clients working remotely also appears to have accelerated the move to algo adoption in general, notes Thorne. “In the last 12 to 15 months, clients have increasingly been using algos to execute bigger clips and are also starting to hedge that risk over a day or so compared to in one go at the end of month, for example,” he says. “FX algos have become another execution method in the toolkit, whereas two months ago it was about more risk offsetting and using algos when volatility was low.”

Marsden agrees, adding the past 12 months have also seen a marked increase in the number of corporates interested in improving their knowledge of algos, to the point where a number have now updated their treasury policies to allow FX algo execution. “Now they are far more comfortable doing their treasury business via an algo in a competitive environment, either using a multi-dealer platform or even directly with us,” he says.

 

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