As the FX algo market takes stock of the lessons learnt so far during the Covid-19 crisis, Tom Appleton and Nicholas Prezioso, Co-Heads of FX Algo Execution at Crédit Agricole CIB (CACIB) share how the bank is further enhancing its FX algo offering to meet the evolving needs of clients.
Can you share any new developments to your FX algo suite and TCA toolsets?
We have two major pieces of work in development. The internal tools we use to monitor liquidity have been so useful for clients that we are opening them up for access via a web page for RealTime TCA and market insights. These have helped clients make decisions on the parameters before and during an execution and this has resulted in some great executions even in very challenging markets. When trading large orders it’s important to have a feel if the order is impacting the market. If the price starts moving is it because of the algo, or is it something else? These tools help to understand what’s going on under the hood of the market. The other exciting development is our partnership with XTX Markets, where we will offer their Execution Algorithm as part of our algo suite. This partnership allows our clients to execute orders using the XTX algo, which is an Implementation Shortfall Algo (opportunistic and seeks to minimise slippage vs arrival price). Orders are placed and executed with CACIB, while order fills are driven by XTX Markets and their unique liquidity. Clients can select the XTX algo as though it is one of the CACIB algo products in our suite. Orders are passed on a transparent basis to XTX who fill the order. All fills are passed back in their entirety to the clients and the client fills are all booked with CACIB. The clients still face CACIB as counterparts to the trade, ensuring the workflow for clients is as seamless and straightforward as usual. Clients will be able to access the algo through all of our existing distribution channels including Bloomberg, FXall and 360T, amongst others.
What lessons can be learnt from this crisis that might help in future development of FX execution algos?
Sometimes when an order is running you really want to know if it’s the algo that’s causing a change. A recommender system based on the current conditions, and if the conditions change then the recommendation changes, would be really useful.
How do you see the FX algo and TCA space growing over the coming year? What will be the key areas of focus, for you and for the industry in general?
We see the FX algo space continuing to pick up. The flexibility that algos offer was shown quite clearly during the pandemic. It allowed clients to easily source liquidity, while working remotely. It gives clients flexibility that is hard to beat. Specifically at CACIB, we continue to improve our overall algo suite, adding new sources of liquidity, a new algo and automated forwards in 2020. Clients have the ability to control urgency, change algos and select specific liquidity pools, all with one touch. This type of flexibility is now needed more than ever. Real-time TCA and market colour has also been a high priority item for us. We have built a web based tool that will allow clients to look at estimated volumes, spreads and see the performance of orders in real-time compared with an indicative risk transfer price. Each pair is also scored on the basis of five metrics that will allow clients to make more informed decisions before entering or an order. Pretrade TCA is another area of focus in the industry and we hope to tackle this in our next phase of TCA development.