JP Morgan sees increase in FX algo spot volumes and ticket size

Andrew Cole, FX Algo Product Manager at J.P. Morgan, explains the different trends in FX algo trading, how the bank has responded to client demand and why even more clients are turning to algo execution to help navigate the Covid-19 market environment.

JP Morgan sees increase in FX algo spot volumes and ticket size

How have your FX algos and associated toolsets been performing in light of the current market environment?

We see ever greater quantities of our eFX Spot volume being executed algorithmically, which is reflective of clients’ increased trust in the robustness and consistency of our algo offering. The trend has continued in recent weeks. With regards to performance, we were pleased with:

  • Reliability: our platform scaled operationally with the increased flows.
  • Diversification: more and a broader range of clients turning to algos to source liquidity
  • Sophisticated strategies: more sophisticated strategies are being selected contrasting with prior volatility events ie US Elections and Brexit, when clients notably preferred limit based algos.

Changes were made to accommodate the increased volume of TCA metrics being computed and our system handled the load as a result.

What client reaction have you seen to recent enhancements you made to your FX algo suite?  

Last year was another busy year for J.P. Morgan in FX algos. We introduced machine learning to our algorithmic execution, improving the decision making of our Aqua VWAP. We responded to our clients’ desire for more data with Algo Insights, an alert which triggers during the execution to keep clients updated on performance and introduced a new aggregated TCA document which offers clients an overview of their algo execution with J.P. Morgan.

Algo Central has been live for a few years now but at the end of 2019 we saw increasing daily user logins as client interest in pre-trade TCM started to take off. Clients ask more and more about our volume predictions, pre-trade metrics and estimated market volume data, all of this is available in Algo Central which can be opened with a single button click from Bloomberg or Execute and via a login on the web.

Our most exciting delivery this year is the upgrade of Execute, our single dealer platform

How are you responding to meet changes in client demand?

For the second year in a row, respondents of our annual e-trading survey ranked an enhanced understanding of specific algos as one of the most important drivers for their further adoption. This year we are looking to simplify our strategy suite and remove unnecessary / unused parameters from the tickets to make our FX Algo product more accessible to prospective clients. As a bank one of the key trends we monitor is the proportion of FX spot volume that gets executed algorithmically. In December 2019 we observed over 50% of volume in tickets above $10m being executed algorithmically, if we include simple orders (Take Profit + Stop Loss) the total percentage climbs to almost 80%. We welcome this trend and are happy to share with clients the metrics which show the improved execution quality they can expect in these sizes from trading algorithmically.

Any new developments/offerings in the algo suite or TCA solutions which you have recently launched or in the pipeline?

Our most exciting delivery this year is the upgrade of Execute, our single dealer platform where a significant re-engineering exercise has been underway for the past 12 months. In the algo space we are simplifying order entry on the tickets and using the 5+ years of usage data at our disposal to identify simpler workflows for clients looking to get orders entered quickly. The simplification has allowed a new level of consistency between FX order tickets and other asset classes. This is especially important as we extend our orders functionality into rates and commodities.