Deutsche Bank has revealed that it will be replacing its flagship algo Stealth, as well as its SmartPeg and IS algos, by combining the capabilities of all three into one new strategy, Stark. Vittorio Nuti, Global Head FX Algos, explains the benefits of the move and how it ties into a broader programme of enhancements to the FX algo suite.
We have been focused on further streamlining and making innovative changes to our FX algo suite in recent months. Combining our Stealth, SmartPeg and IS algos into a new flagship strategy called Stark, in effect an opportunistic peg algo, is a key part of these changes. With Stark, clients will have the ability to trade every child order around mid or better when in passive execution style, effectively making it behave more like a pegged algo, while in normal and aggressive execution styles it becomes progressively more opportunistic. This new, more dynamic algo strategy is enabled for spot direct pairs and will be enabled in nearly every currency we support today over the course of the year.
This change will also simplify the way we are able to communicate with our algo clients and makes it easier to explain how the algo works. In addition, combining the strategies means we will have more data to allow us to further simplify and fine tune the system but while still allowing customisation from a client perspective.
In the same direction of travel, we have very recently gone live with a major enhancement of our mid-price for G10 pairs, which means we now have a much more precise way of determining mid and trading on the back of that. This enables our clients to retain more of a spread and trade more passively, without having any adverse impact post execution.
Another important development has been the inclusion of our Deutsche Bank Principal Resting Order (PRO) in our algo suite. This move allows us to leave limit orders with the franchise with less of an impact. Not trading on ECNs or other venues allows for less visibility and less information leakage. We’ve done quite a bit of work to achieve close to a flat market impact post execution, as well as researching the impact around order placement to weed out information leakage.
This allows us to effectively have a new source of liquidity, which now represents roughly 30% of all volume and, given the size of the Deutsche Bank franchise, it enables us to really differentiate our products versus a lot of our competitors. A further customization that we have recently developed is the ability to change liquidity sources depending on execution styles, that is if clients prefer to do so rather than using our curated liquidity offering. Without changing the algo, the client can change execution style and have three different liquidity sources at their disposal.
NDF Algo Offering
Last but not least, we are continuing to further build out our NDF algo offering. We have been live with all the LatAms and Asian currencies for some time and have recently integrated Chilean peso and Colombian peso into Bloomberg and BidFX. We’re beta testing NDF broken dates with the view to add them to our product suite. Many clients need to trade a specific date but most OMS systems do not allow clients to trade the one month and then roll it with a swap, etc. Being able to trade broken dates will open up demand from many clients as it simplifies their workflows. We are very excited to be able to introduce this solution, alongside our other ongoing developments to the algo suite, to our clients in the coming months.