GENERAL OVERVIEW:
What is the FX algo called?
Stark, Deutsche Bank’s flagship algo, matches client interest and captures liquidity opportunistically.
What category does it fall into?
Dynamic, Stark balances passive and aggressive orders in alignment with market conditions, varying its speed.
What does it attempt to do?
The Stark algorithm taps into Deutsche Bank’s broad client franchise and select liquidity providers to execute faster than average (according to TradeFeedr data), while maintaining skew safety.
Stark offers customizable parameters
STRUCTURE
What is the algo’s software architecture?
Stark’s software, based on C++ and Java, with execution servers in co-location – help to minimise latency.
Does it use proprietary modelling?
Yes, Stark utilises proprietary modelling within its mid pricing and signal engine, reflecting real-time market conditions.
Does it use technology such as AI or ML? If so, how?
Indeed, various sophisticated modelling and machine learning techniques drive pricing engine decisions and order placement adjustments, optimising execution even in high volatility environments.
FUNCTIONAL ASPECTS
Does the algo adapt automatically to prevailing market conditions and if so how?
Stark dynamically adjusts trading speed based on currency pair, time of day, and current volatility, ensuring efficient execution. A large order placed at an illiquid time vs. a liquid time could be over 15 time slower.
Does it incorporate smart order routing?
Absolutely, leveraging large scale statistical analysis to select safe venues and optimal sizes, in synergy with the Principal desk’s insights.
How does it minimise market footprint?
Through extensive data calibration and scenario testing, Stark minimises footprint while maintaining a safe and sustainable execution program. This does limit the number of venues but it allows for a safe and sustainable execution programme.
What liquidity seeking and access capabilities does it deploy?
Stark dynamically rebalances execution venues to target available volume efficiently, on an order by order basis to ensure volume is targeted where available.
What operational risk management does it include?
Various safeguards, including fat finger controls and throughput thresholds such as max size per order or gross amount per day to ensure execution safety. However there are other scenarios under which execution would be halted, for example, if the parent order exceeded any pre-determined throughput, rejection/cancellation count thresholds, or if the market becomes too illiquid.
PARAMETERS & CONTROLS
What client inputs are available in the algo?
Required Parameter: CCY, Side, Quantity (execution style defaults to Normal)
Optional Parameters: Execution Style (passive, normal, aggressive), Limit price, iWould.
Customization: Stark offers customizable parameters such as execution style, and liquidity sources, empowering users to tailor execution to their needs.
How much real-time feedback does it provide?
Real-time TCA and expert guidance assist users in adjusting execution speed to meet requirements effectively. When external liquidity is selected, the algo will manage the balance between internal and external placement based on real-time fill events. For the user, real-time TCA is available that can help to determine whether the urgency needs to be increased or reduced to meet the user’s execution speed requirements. Also, our experience and hands-on sales and trading team provides guidance around general market conditions and themes to assist the user through the execution process, if needed.
CAPABILITIES AND USE
What execution styles (e.g. passive/aggressive) does the algo support?
Stark flexibly trades passively and aggressively to balance market risk and cost savings, it’s aggressiveness can be changed inflight by changing the Execution Style.
How can it be integrated/called with/by higher-level workflows?
While designed as a standalone strategy, Stark seamlessly integrates into client EMS and Deutsche Bank workflow solutions, which help client automate processes and reduce costs for their FX needs.
What is the optimal scenario for its use?
Stark’s adaptability allows for various scenarios, commonly used for minimising cost spread like gamma hedging. However, users typically use Stark in its three default execution styles, with an Arrival Mid benchmark (when set t passive) and Cost save vs Risk Transfer (when set to Normal or Aggressive). It is often used for as a take profit for derivatives traders to minimize cost spread. Due to its flexibility and nimbleness, Stark can be used in extremely varied scenarios, for example by finely controlling skew and cost of child execution we can tailor expected duration per client or currency.
Any other functionality worthy of note?
Check Stark’s rankings on Tradefeedr (an independent transaction cost analysis provider) for evidence of its speed and cost savings. Our friendly team is here to help you make the most out of the Stark algo and more generally FX execution, get in touch!
