Standard Bank is beginning to consider offering certain types of execution algorithms such as those that would trade off the firm’s own liquidity, although the move is still exploratory at this stage, according to Tim Hutchinson, head of e-FX at the top South African bank.
Hutchinson told FXAlgoNews that sourcing rand liquidity remains the market’s biggest challenge and as such execution algos that operate with the wider market are not really viable at the moment. But an initial, limited move might make more sense.
“I do think that liquidity is probably the biggest issue that we grapple with,” Hutchinson said. “That being said, execution algorithms are something which we are exploring and looking at. We’re trying to understand and think a lot internally about what’s the best way to marry what the client is looking to achieve by the use of an execution algo in light of a tough liquidity environment when it comes to the rand.”
Standard Bank, which has the biggest customer base of any bank in South Africa, is looking at a few options. “As a simple example, if you were to have a client that just wanted to do the basic time-slicing option, that’s something which could be quite a compelling offering to a local corporate who wanted to average out the price over the day. But instead of letting him access to the primary market where the liquidity is not necessarily guaranteed we would do it against our own liquidity.”
Hutchinson said Standard has a strong institutional client base and it has had conversations with some of its non-banking financial institutional customers about a move in this direction, as well as with large treasuries. He believes that despite a strong preference for voice trading at the moment, the South Africa market will embrace algorithmic trading once they come on stream.