Recent enhancements to the algo suite offering have notable resulted in expanding the FX algo client base for the bank, says Sada-Paz. “There are new client segments that are now looking at algos for the first time,” he adds. “Historically, the main users of algos were real money clients. Now we see every different type of customer using our algos. Corporates have become much more sophisticated and macro hedge funds are increasingly using algos as part of their toolkit. Part of the drivers behind the diversification is that we are now able to showcase a better product and the investment in our team continues to ensure an unrivalled level of service for our clients.”
Other clients, such as systematic hedge funds, are now turning to bank algos for trades they previously automated through electronic risk transfer, according to Sada-Paz. “This segment used to build their own algos in-house but are now turning to bank algos instead. They have discovered that our algos offers very good execution quality at a far lower cost than trying to build and maintain their own algo strategies in-house,” he says.
Growing transparency
Phull adds that in the coming year, a key area of innovation will be leveraging the new trading stack to develop more tailored versions, or different ‘flavours’, of the existing algos, designed to suit the various execution needs of clients. He explains that these customisations, informed by TCA data and the nature of client flow – whether portfolio manager-driven or transactional – have already been successfully implemented in strategies such as Whisper, Decipher, and VWAP. “Beyond this, we are undertaking a rebuild of our Emerging Markets offering, ensuring deeper liquidity integration,” Phull adds. “In addition, improving liquidity provision and execution transparency continue to be top priorities. We are also seeing more opportunities to internalise interest across different areas of the business and using this to reduce the need to trade externally to improve execution outcomes.”
Furthermore, Sada-Paz notes that improvements in algo analytics and TCA have also ensured clients have more data points, and a bigger sample set, to have confidence that algo execution is indeed better in a lot of the cases than risk transfer. “Our efforts to improve execution quality go hand-in-hand with a broader push for greater transparency in data-sharing and performance measurement,” adds Phull. “We believe that independent analytics providers – such as TradeFeedr and BestX – play a crucial role in providing industry-wide benchmarks, ensuring clients have access to objective performance assessments. More importantly, transparency must be actionable. We focus on providing clients with granular execution insights so they can evaluate algo trading performance in a measurable, data-driven manner. The shift towards more informed execution choices is leading to better trade outcomes across the market. Over time, we believe this level of transparency will become the industry standard, but today, not enough providers offer such depth of execution data.”
Low touch does not mean low service
There has also been notable growth in the use of Bank of America’s Whisper algo, which is designed to maximise internalisation while minimising market impact, Phull adds. “Clients are becoming more discerning, recognising that not all internalisation is equal,” he says. “Simply trading against a principal price is not the same as identifying natural offsetting client flow. To provide clarity, we tag execution types transparently, distinguishing between principal-driven fills and client flow internalisation. This ensures that clients have a clear view of how their trades are being internalised, improving confidence in execution quality. Clients also want to maximise their access to internal liquidity across other algos and understand why an internal venue might be preferred (or not) and the data behind the decision.”
Liquidity consultancy is also becoming a key differentiator, adds Sada-Paz. “Between e-sales, the algo trading team and our quants, we really have stepped up to another level to handhold and service clients with the liquidity content we can now create,” he explains. “It also ensures our algo clients feel comfortable and ensures we are providing a good user experience with market-leading levels of service.”
“There is also a growing expectation that low-touch execution should mean low service – in fact, the opposite is true,” Phull adds. “Clients increasingly demand high-touch advisory support, even when trading via algos.” Phull explains that, to meet this demand, the bank has invested significantly in the quant research and execution advisory teams to provide clients with value-add services such as real-time insights on market microstructure, liquidity conditions, and trade execution dynamics, custom algo refinements and strategy optimisations and consultative support on trading decisions and execution efficiency. “While some firms are talking about fully automated servicing models, we believe that human expertise remains irreplaceable in complex execution scenarios,” Phull says. “This personal service and the level of bespoke content that we can provide to our clients is second to none – and is yet another factor behind the phenomenal growth of our algo offering.”
