You launched the DynamicX algo earlier this year. What was the motivation to build this strategy?
The motivation was client demand, both specifically from our clients as well as the continuing trend of the liquidity seeker algos taking the biggest share of the algo volume. It is a strategy we have had in mind for a long time but we wanted to really make sure it had three elements: the customer need for it; the quant stamp from our side and the use of it by our own trading team before putting it out to the clients. We are very happy to finally be able to offer this strategy to our clients.
How does the new strategy complement the existing suite of FX algos?
The SEB algo suite is small on purpose. We really have all the basics a client using algos would need and we want to make sure each of those algos is great for that purpose. We did not have a liquidity seeker algo and also saw it as a critical development from our side so it fits nicely with our existing suite which is made of: Peg, TWAP and an Aggressive watch. The DynamicX is the fourth algo of our suite.
Do you have any plans in the near future to further develop the FX algo suite?
The closest concrete plan is to add an additional platform through which we will offer our algos. We offer our algos on Bloomberg and FXAll today and we also want to be able to offer them on FXConnect. We also want to offer a fixing algo and we plan to have that ready on some platforms at least by the end of this year. We are also constantly tweaking and improving our current algos.
In what ways do your analytics/TCA tools further help to support clients in achieving their execution aims?
Our post trade TCA gives the clients the necessary benchmarks to be able to judge the execution. We have also recently launched a pre-trade TCA that is not available to clients yet but that is available to our salesforce. The objective with that pre-trade tool is to be able to inform the client based on historical data and current market data, for example on what length would be the best for their chosen algos.
This is critical for clients working in the scandies as the ideal execution speed is so much slower than in EUR/USD and can vary greatly depending on the time of the day. This is a tool that we are just starting to use and we are looking forward to being able to have a version for our clients in the future.
Looking ahead, what will be the next step in the evolution of the FX algo market?
One of the trends will be consolidation. It is difficult to see how all the algo providers that exist today can continue to offer algos in general or to offer an extensive suite of algos. Clients have a few favourites and it is not efficient for them to jump between algos constantly. In the long run, this will mean that some algos will disappear and that some algo providers might choose to focus on other areas. The algos that will remain will keep using data and machine learning as tools to constantly improve all the relevant parameters like efficient search of liquidity and reducing and monitoring of market impact, for example.