BNP Paribas has reported a number of new clients who have never used FX algos became active users during the volatile trading conditions caused by the Covid-19 pandemic.
According to Asif Razaq, Global Head of FX Algo Execution at BNP Paribas, many of those new clients had previously been sitting on the fence about using FX algos and had either not felt ready or were happy with the pricing they could get using a traditional risk transfer methodology. “Yet in the volatile market events seen in March, spreads became prohibitively expensive and so for the first time, using an algo became a valid choice for them,” Razaq adds. “We saw at least 15 new clients join BNP to use execution algos for the very first time. Using FX algos became a viable, cost effective option for them.”
He explains that for those new entrants who were not comfortable using FX algos, BNP was able to offer a new on-behalf-of service, so rather than the client self-executing, they could leave the order with one of the bank’s dedicated algo traders and ask them to the work the order for them. BNP then manages the execution and keeps the client updated as the order is running.
“Many new clients have a certain fear factor, ‘Have I put the right number of zeros on the order?’ They don't want to get things wrong, when they hear the word algo, it is a scary topic as opposed to an effective trading tool that they could use,” says Razaq. “Over time as they gain experience, they will become comfortable to self-execute their algo orders. But in these unprecedented volatile markets, I think BNP offering this service to our clients has really raised the profile of execution algorithms in their day to day workflow.”