What are the unique features of your existing FX algo suite?
Since the beginning we have offered three algos: a Peg, an Aggressive Watch and a Twap. One of our key features is our internal matching, where we use exchange technology derived from equities so that algos can match our internal position based on our interest as well as other algo orders. The main driver is always client feedback and comes from discussions that we have had with several of our customers. We also see how much the liquidity seeking algos are being used in the market in general and it feels like a natural step for us to take and bring our scandi angle into that offering.
Can you tell us more about your plans to further enhance this offering?
Our ambition is to always develop our offerings and making sure that we work in close cooperation with our clients to incorporate their needs and feedback in product development. We are currently working in improving the logic of our TWAP and we are also looking into launching a liquidity seeking algo, where the execution can differ based on the market circumstances. All the changes that we do, or new algos we launch, are used by our own traders. We want to keep a small number of algos available to our clients and we want to be very comfortable when selling these that they have a proven track record within our own trading first.
Why is the franchise liquidity such an important consideration for algo clients?
This is an essential question. If each bank’s liquidity was exactly the same, all algos across banks would be very similar. The liquidity that you are able to access is one of, if not “the” key differentiator for algos. Liquidity providers (LP) have access to most of the same external venues, but what can really make a difference is the bank’s own internal liquidity. This is completely different and varies greatly from LP to LP and currency to currency. That is why we feel very confident with our scandi algos. We know we have a great franchise that is unique, our client feedback is a great testimony of this. And this is really where the focus lies for us, making sure we can leverage this franchise and use it in the best way to improve our clients’ execution and satisfaction.
Looking ahead, what will be the key areas of focus for yourselves and the wider development of the FX algo market as a whole?
I am really pleased to see some of the work that is being done in the algo and TCA space in the FX Global code and I think that the focus that is put on transparency and disclosure of information is absolutely right. Both liquidity providers and clients have to strive towards the best possible understanding of the algos by the clients so that the right questions are asked and answered. For the industry in general, it is important to continue working on being able to really compare algos across banks and with their particularities in the most accurate way. For us, another key focus this year is to incorporate some of our quant research on pre-trade TCA to continue to add value to our clients.