Leveraging interactive execution technology in the FX algo trading process

With Asif Razaq, Global Head of FX Automated Client Execution at BNP Paribas


BNP Paribas’ award-winning FX spot and NDF algorithm service CORTEX employs next generation interactive execution technology. Broadly speaking what is interactive execution?

Asif Razaq

In opaque FX markets, clients have historically lacked access to data and struggled to gain visibility on the inner workings of their algo execution, let alone interact and take control. The issue with algorithms today is that they are broadly seen as black box technology, so once the user submits their order they have very little insight into the methodology behind the algorithm.

BNP Paribas have addressed this issue by launching Insight Live, with interactive algos, that put the client in the driving seat and gives them an algo eye view of the market in real time.  What makes our algorithms interactive is that they go far beyond a simple click-and-trade functionality but instead provide clients with live feedback, track execution performance against benchmarks, and understand the environment using real time market data. With the introduction of AliX, the industry’s first digital trading assistant, earlier this year, clients can now directly interact with their algorithm during execution.

BNP Paribas pioneered the concept of interactive algorithms. How challenging was it to get the technology working perfectly and why is the FX market a good fit for it?

We’re driven and influenced by advances in tech, which in turn create exciting opportunities to redefine what’s possible. As our clients become more and more sophisticated in the way they use algo execution it has become important to build solutions that optimise execution even further.

To do this we’ve taken a leaf from Silicon Valley’s book, building on the concept of automated assistants such as Siri and Alexa and brought the latest technology to financial trading. Thanks to the nature of the bank’s interactive algorithmic methodology, the fourth-generation algorithms are already able to continuously adapt and recalibrate their strategy to better function.

Together with ALiX and Insight Live, we have now given clients greater transparency and control in uncertain markets, while significantly reducing execution costs.

The latest adaptive algos clearly have much greater built-in intelligence than previous generations of these toolsets so what are they doing that makes them so smart?

No longer does a trader need simply to enter their order, press go, then blindly wait until completion and hope the strategy performed as expected. 4th generation, interactive algos put control of the execution firmly in the hands of the trader by seamlessly combining tried-and-tested adaptive strategies with a wealth of real-time market data and powerful analytics. Information such as the volume currently trading across venues, depth of the overall market, whether the market is currently bid or offered, and what liquidity regime the algo is currently operating in can all be combined with real-time performance of the algo to optimise their execution even further.

ALiX is the industry’s first digital trading assistant

Is interactive execution suitable for all types of clients and strategies or are the applications and benefits much more specific?

The great thing about interactive algorithms is that we have engineered the platform specifically to service all classes of clients, from the novice to the most sophisticated. Depending on the needs of the client, the platform has been built so that they can see as little or as much detail as necessary and ALiX will always be there providing key updates on their execution.

Is there a premium to be paid for using technically advanced algo trading technology like this or are the costs balanced out in other ways?

Our focus has always been and will remain making high quality products that provide our clients with the tools they need to manoeuvre the market. Of course advanced technology comes with its costs, however rather than charge a premium to the client, we continue to invest and build on our products; by providing a more value add effective service clients will reward us by using our product more. We haven’t increased the cost of the product since its launch but rather invested in making the product more sophisticated, perform better, which is why our clients turn to us.

The Covid-19 crisis has seen increased levels of volatility. How have your interactive algos performed during recent market turbulence?

During the pandemic, our interactive algorithms have proven to be very effective at navigating the difficult and rapidly changing FX liquidity landscape. Their ability to respond to changing market conditions independently, and provide mid-flight information and control of execution, has meant that they have been able to navigate the market without too much change in performance due to their intelligent spread capture logic. This means that they are able to monitor the liquidity landscape and execute optimally. When spreads are wide and markets are thin they can place passively and benefit from spread capture without significant market impact.

How does BNP Paribas cater for clients who employ these toolsets but still want more involvement in the algo execution process?

The very nature of interactive algorithms means that they enable the trader to be more involved in the execution. While simplicity is key to CORTEX iX, more sophisticated users are able to benefit from a more bespoke service through Flex iX, a customised algorithm which lets clients get under the hood of CORTEX iX to create their own versions of the pre-existing algos, engineering personalised versions of Chameleon, Viper or Iguana. With this level of flexibility, advanced clients are given the opportunity to build on the strategy itself and decide on key composing elements of the execution so that every time they reach for a given algo, they are getting a specific, customised service.

The FX algo trading space is starting to become noisy. How important will next generation technologies like interactive execution and a willingness to invest in them become in helping to differentiate providers in the future?

A big part of what makes FX interactive execution so exciting is that we are always pushing the limits of the technology and what is possible. Advances in the tech and the increasing sophistication of our clients means we need to keep innovating and adapting our strategies to meet changing needs.

To do this, we place the focus on investing in new technologies to make our solutions more intelligent and automate workflows where possible. There’s always a new frontier in algos for FX, and we plan on staying right at the forefront of that.

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