ANZ develops new FX algos to enhance liquidity access

February 2023 in Provider Profiles

Currently, many of the bank algos available to the market offer clients very similar functionality with very little differentiators other than the algo name, Thorne says. “Ultimately when clients use algos their main aims are: a/ to fulfil best execution requirements, and b/ to get the best possible price that they can. And so with this in mind, we’ve tried to keep our algo suite quite simple. It is not overly confusing but also still allows our clients to have access to enough functionality to ensure they are making the best use of our liquidity,” he explains.

ANZ first introduced its Twap algo to clients in 2017, followed by the launch of a dynamic algo last year. When it came to building out the algo suite even further, the team first looked at ensuring the technology and infrastructure was fully developed before turning their attention to the development and release of additional strategies, which was all done in-house. “We now have another three new FX algos which are about to be released,” Thorne adds. “We will then have what we would consider to be a complete suite. Most of our algo developments are driven by customer demand, so we are not just creating algos for the sake of creating algos, but only where we can see a real benefit to our client experience.”

Because the algos have been built around customer need, such as multi-national corporates, as the market has progressed, algo clients have also become increasingly sophisticated and are now looking for different objectives from their algo execution, explains Marsden. One of the algos clients have been asking for was a purely passive algo, which is one of ANZ’s three new strategies being rolled out. “It’s for customers who want to execute their order over a longer time frame with minimal market impact – either to internalise against our own liquidity or be passive against the markets that we have access to,” Marsden says.

The second new build is a pegging algorithm that also tries to be passive in the market while letting the customer choose their level of urgency or aggression around their execution, he adds. “Finally, we’ve also connected the limit and stop algos across the platforms to help customers automate leaving their orders with ANZ,” says Marsden. “We’ve seen a large uptake in the number of customers either executing against our benchmark algos or wanting to leave their resting order interest with us. So this further automates all that side of the business.”

While both agree that the key aim of the three new algo builds was to keep the customer focus and not overly complicate the suite, additional projects are also underway to continue to enhance the client experience and facilitate access to ANZ’s unique liquidity franchise. “Our USP is the liquidity we have access to. If you don’t have this access to liquidity, then even the most advanced algo in the world will not be able to minimise market impact and perform how it was built to perform,” Thorne says.