Jefferies creates next generation algo trading platform

The past couple of years have seen a number of changes in the FX market which is driving demand for greater transparency; from the introduction of MiFID II and the launch of the FX Global Code of Conduct through to improved client awareness of best execution. Yet although this has prompted an increased uptake in algorithmic trading solutions, the sophisticated tools available on sell side trading desks have not always been there for buy side use as well, says Brad Bechtel, global head of FX, Jefferies.

Jefferies creates next generation algo trading platform
Brad Bechtel

FX ATS

To address the balance, Jefferies has launched its own FX algorithmic trading system (FX ATS). The platform is the first fully customisable algorithmic trading solution available in the market, allowing clients to leverage the same core technology that market makers use to formulate their price and intelligently execute trades, Bechtel explains. “Every trade is executed against direct market access (DMA) liquidity, interdealer broker ECNs or customer ECNs, maximising spread earned while minimising the client’s footprint in the market,” he says. “It’s more than just offering algo execution strategies, it’s the next generation of where algos can go.”

Launched after two years of development, Jefferies FX ATS offers buy side clients the flexibility to control their execution if needed and the ability to marry that to the right liquidity for the right currency pair. The platform also offers full TCA to clients, which provides robust, real time analysis during the course of the execution. 

However, the way Jefferies has approached creating FX algo trading solutions is very different to that of the Tier 1 banks, says Bechtel. “We’ve created a lot of flexible functionality that allows traders to switch their preferences on-the-fly, without having to re-enter orders or cancel orders, or if they prefer they can also opt for ‘set-it-and-forget-it’ static algos,” he adds. “The market has become a little too complex relative to what the participants need, so we keep our automated solutions relatively straightforward.”

FX ATS
FX ATS

In keeping with this ethos, Jefferies currently offers three automated algos and a hybrid algo, which blends five distinct execution strategies into one. According to Bechtel, customers generally use algos in order to earn spread and minimise market impact, which they are able to achieve with this selection of strategies. He adds that clients also want access to all the liquidity on the various ECNs, which is a service most other algo providers are not able to accommodate.

CORE STRENGTHS 

Instead, Jefferies’ FX ATS comprises two core strengths - the algo strategies and the liquidity behind them. Bechtel explains: “This is an area which hasn’t had much focus from the sell side institutions. They are more focused on their algos and how the interfaces look on the front end, but there is very little focus on the liquidity behind the algos.”

As one of the newer entrants to the algo market, Jefferies believes it has been able to create a bespoke solution tailored to their client needs, which also utilises the latest technology and functionality. “The arms race of algo front-end capability has largely played out and now the focus is shifting to the liquidity behind the experience and market impact,” Bechtel explains. “Jefferies as an institution has a saying which is ‘clients first always’. We designed our algorithmic trading solution with that in mind.”