Recent market volatility, coupled with an increasingly fragmented liquidity landscape, has seen a marked uptick in Asian clients turning to algo execution as an effective way to navigate the rapidly changing FX landscape. Algo strategies have also proven to be effective in executing smaller order sizes in less liquid currencies, coupled with improved data and analytics and an ability to access a wider range of liquidity sources. The growth in algo execution in Asia is further supported by improved bank technologies and a drive for algo providers to collaborate with clients to achieve their desired execution outcomes.
In addition, the availability and benefits of using bank algos has now become widely recognised by corporates of all sizes, not just larger firms with algos developed in-house. Improvements in algo technology and the availability of improved pre- and post-trade analytics has supported the uptake of algo execution as a suitable option to achieve desired execution outcomes, offering both transparency and cost efficiencies to corporate clients. Algos additionally offer the benefits of reduced market impact, which coupled with sophisticated internalisation and liquidity curation offerings have created an additional appeal for the adoption of bank algos in general.
of e-FX Sales, MUFG
Ho agrees, noting that global asset managers and hedge funds had the benefit of leveraging their experience with algorithmic execution in other asset classes such as equities and futures, resulting in their rapid adoption of FX algos as well. He explains that these groups were attracted by the ability of FX algos to help them navigate increasingly fragmented FX markets and access deeper pools of liquidity. Now however, Ho sees a notable rise in adoption among corporate clients as well. “For corporates, FX algos are not only a means to enhance liquidity access, but they are also increasingly valued as a tool for achieving best execution. The systematic analytics provided, both pre- and post-trade, offer corporates a robust, data-driven framework for evaluating and demonstrating execution performance to their stakeholders,” he adds.
Common algo misconceptions
In order to effectively support the diverse execution needs of these client segments, Ho says that MUFG’s approach centres on a deep understanding of each client’s workflow and objectives. “By engaging closely with clients, we can tailor our recommendations, focusing on relevant benchmarks and suggesting specific features that best align with their trading strategies,” he adds. “Beyond simply providing the technology, our team partners with clients throughout the entire trade lifecycle: from initial consultation and pre-trade analytics, to post-trade reviews and ongoing performance assessment using TCA tools.”
Additionally, having a better understanding of a client’s workflow and execution objectives allows algo providers to make suitable recommendations that help to achieve a client’s goal. Ho explains that when getting a client started on FX algos, taking a holistic approach and focusing on the entire lifecycle of the trade is more effective that solely looking at execution. “Other than explaining the mechanics, we spend time going through their requirements, providing them pre-trade analytics and finally after executing the algo, we do regular reviews on algo performance through TCA tools,” he adds.
As clients adopt FX algos, the level of service they receive actually increases, according to Ho, which he believes is contrary to the common misconception that sales coverage diminishes with electronic trading. “Our approach is to maintain ongoing engagement throughout the client journey, with our sales team evolving from a purely execution-focused role to one that is much more advisory in nature. We provide clients with valuable liquidity insights, tailored execution advice, and regular reviews of outcomes, ensuring they are well supported as market conditions change,” he adds. By recognising that algos are just one of several execution tools available to clients, he says that MUFG’s role is actually to help determine the most suitable option for each scenario.
Benefits of reduced market impact
For example, during periods of heightened market volatility, Ho says that the team worked closely with clients to assess the prevailing conditions and collaboratively decide on the best execution method – whether that was using algos, voice, or a combination of both. He adds: “An interesting recent observation was that the use of algos not only continues but often increases during volatile periods, as was evident during last year’s Liberation Day when clients sought greater control and flexibility in managing their trades. This close partnership ensures that clients are able to navigate liquidity challenges with confidence, supported by a team that is committed to delivering the best possible outcomes.”
Furthermore, users of FX algos are starting to care a lot more about the quality of liquidity as opposed to the quantity of liquidity, which Ho explains has created an increased focus on internalisation when it comes to FX algos. With more sophisticated TCA tools in the market, clients are better equipped to determine the true cost of execution and as markets become more fragmented, the cost of market impact grows. Having a good internalisation ratio mitigates the market impact, Ho says. “At MUFG, we cover a broad range of client types across multiple geographies. The magnitude and diversity of our client flow allows us to achieve a high level of internalisation, especially for Asia where we have a large footprint,” he adds.
According to Ho, by adopting a holistic, client-centric model, MUFG is then well positioned to deliver targeted, effective algo execution solutions that meet the unique requirements of every client, whether they are asset managers, hedge funds or corporates. To build on this success, he notes that MUFG also recently relaunched its FX algo suite to continue supporting the evolving needs of its clients. “We took the approach of an overhaul to our offering as that allowed us to consolidate and enhance strategies,” he explains. “We believed that simplicity was an advantage and streamlining our offering would allow our clients to better understand it. Other than the type of algos we offer, we are also utilising an improved underlying engine for liquidity access. This will help to drive improvements in our algo performance, achieving better outcomes for our clients.”
Enhanced decision making
Ho explains that the enhancements to MUFG’s FX algo suite revolve around both simplicity and flexibility, in a bid to make it easy for clients to understand while enabling them to tailor their execution according to specific objectives. Clients can adjust aggressiveness levels, set limit rates, and select preferred venues for sourcing liquidity, ensuring the offering aligns closely with their trading styles and requirements, he continues. “Much of the design is centred on how clients expect to interact with their trades, providing options that cater to a wide range of execution preferences and sophistication levels,” says Ho. “We offer four different types of algos – TWAP, VWAP, Bushido and Zen. Each of the algos have different objectives and features addressing client’s requirements – from time slicing, to liquidity tracking, to minimising implementation shortfall, to dynamic opportunistic execution based real-time market conditions.”
Other than the algo strategies, one of the stand-out differentiators for MUFG is the robust performance in underlying liquidity, particularly with Asian currencies, Ho explains, which in turn is a reflection of the bank’s strong corporate franchise and extensive footprint in the region. “This unique capability has resonated with corporate clients, who are increasingly recognising the relevance of our solution and exploring its integration into their workflows,” he adds. “Although it is still early days following the relaunch, initial feedback from clients has been overwhelmingly positive, with many appreciating the suite’s adaptability and the practical benefits it brings to their trading strategies.”
There has also been a notable shift in how clients approach data and analytics for FX algos, with traditionally post-trade TCA being viewed as the standard, serving as a validation tool for execution quality. Now, however, there is a growing emphasis on pre-trade analysis, which empowers clients to make more informed decisions and set up their trades for better outcomes from the outset. The challenge, Ho argues, lies in the sheer volume of available data, which creates a tangible risk of information overload. “Our role is to help clients cut through the noise, identifying and focusing on the most relevant metrics, and presenting insights with clarity and simplicity” he says.
Part of an evolving FX market
“Moreover, clients are evolving in their use of benchmarks. Rather than treating them solely as scorecards, they are increasingly leveraging benchmarks to gain market insight and refine their future algo strategies,” adds Ho. He explains that the best approach is then not merely to provide more data, but to emphasise the quality and relevance of the analytics. By prioritising actionable information, MUFG can then enable clients to enhance both their pre- and post-trade processes, supporting continuous improvement in their execution outcomes, Ho says.
Looking ahead, Ho says he anticipates that AI and machine learning will play an increasingly significant role in FX algo strategies and related tools. “We are already witnessing early adopters integrating AI, particularly among clients who favour a systematic approach to execution,” he adds. “The rise of the algo wheel exemplifies this trend, as it enables the selection of algorithms based on objective data and pre-defined logic rather than relying solely on human discretion.” This method is proving especially popular with clients who execute a high volume of trades, as it allows for greater consistency and efficiency. Ho adds that as the technology matures and more firms embrace data-driven decision-making, MUFG expects the adoption of AI-powered strategies to accelerate, further enhancing the sophistication and adaptability of FX execution tools.
“Our team’s key focus this year centres on placing clients at the heart of our distribution strategy, prioritising education, open dialogue, and regular feedback,” Ho continues. “As we relaunch and expand our algo offering, we are committed to familiarising clients with the full capabilities of FX algos, actively evangelising their benefits, and tailoring our approach to meet the needs of both seasoned users and those new to FX algo execution.” In addition, the team will intensify support across both pre- and post-trade aspects, with a particular emphasis on pre-trade analysis and maximising performance, which is especially relevant for corporate clients seeking greater market transparency. “Through continuous engagement and bespoke guidance, we expect further growth in algo execution and remain dedicated to delivering ongoing support and development for our clients,” Ho concludes.
