State Street’s suite of FX algos was recently made available on multibank platforms BidFX and 360T. What prompted this move?
Client demand to access our algo offering has been very high across a wide range of platforms. As a result, and to highlight our continued commitment to our clients and investment in the client algo business, we decided to expand our algo offering on BidFX and 360T to meet our clients where they want to trade and provide them with a full set of execution tools.
The algo execution space has become crowded over the years, starting from a few providers 10 years ago to 20+ providers currently. What is your key consideration in designing your algo suite to stand out in the competition?
Client experience is a key theme of State Street’s FX services and algos are no exception. We listen to our clients concerns about what is lacking in the algo market and we implement suggestions that provide additional value to them. Based on this feedback, we offer a succinct suite of algo strategies, allow for the curation of liquidity providers, offer in-flight transparency and control of the orders, segregating our algo orders for information security purposes while also providing 24 hour algo support.
Franchise liquidity is a very important factor for our clients. They recognise our unique market position as a global custodian with a top volume ranking with Real Money clients. They know that through our internalisation with Real Money clients, State Street can provide immense value with liquidity, which is not available from other providers. Central to our offering is our differentiating feature called Interest Match, our peer-to-peer matching of algo interest to our franchise liquidity. This match helps to reduce market footprint, market impact and information leakage. Clients have the flexibility to add Interest Match to existing liquidity venues, or they can also choose “Interest Match only” isolating executions to our franchise interest.
Can you tell us more about your Interest Match feature?
Interest Match enables our algo orders to be matched with our franchise positions that originate from both our custody franchise and our large external third party business. In addition to matching with franchise positions, our algo clients can also match their algo orders with peer algos executing in the opposite direction via Interest Match.
Some of our competitors offer skewed streaming prices during algo execution. The rising client concern that these skewed streams potentially introduce excessive market impact and signal risk during algo execution has caused us to re-think this offering. Clients are also concerned about who they are matching with on these skews and how often and persistent these skews are being shown in the market.
We are working with our clients to address these concerns by adding a new enhancement to Interest Match. This pioneering work will provide a more targeted and subtle mechanism than traditional skewed price streams that matches client algo interest to our eFX franchise client interest. Clients can be confident they are matching with peer liquidity, who have genuine interest to trade, resulting in dramatically reduced information leakage.
What do you offer to clients in terms of flexibility when using your suite of FX algo strategies?
In-flight control and transparency are important to clients, so we developed our offering to allow clients to dynamically interact with their orders any time during algo executions. This includes changing liquidity venues, speeding up/slowing down, pause/resume etc. Last year we also rolled out single-sign-on capability on multibank platform FXConnect, to launch into our single dealer platform VectorFX with a single click. In VectorFX, we provide full transparency to our clients via real time transaction cost analysis (TCA), allowing them to view how their orders are filing against the market, the execution venues and slippages against various benchmarks.
We also offer “Fill Options” functionality for clients who want to stay engaged at critical moments. Fill Options allows a client to execute either a portion or the remaining of the order via our streaming price within the parent child algo structure.
We transparently display both our price and the estimated “would-be” parent algo average price prior to execution. This has proven very popular with our clients.
Do you have new developments or releases lined up for the coming months which you could share with us?
In addition to our Interest Match enhancements, we are rolling out bespoke “algo of algos” solutions for our clients, which enables clients to work their order in multiple child algo strategies.
Given our franchise of some of the world’s biggest Real Money clients, we will continue to talk to them and listen to what they need. There are many developments still to come as we talk through those possibilities with our client base and we continue to invest heavily in this area.