Please tell us more about the thinking behind State Street’s ‘algo of algos’ and the key drivers behind the build?
Our clients drive our innovation. Our ‘algo of algos’ solution, or Staged Order, is a direct response to clients who want to manage their larger FX algo orders actively and with more flexibility. This includes breaking down the parent order into multiple child orders, running various strategies and working multiple price levels dynamically. No matter how many child algo orders, multiple strategies, or live liquidity fills are used in the Staged Order, they will all flow back into the EMS as one algo ticket, with one average algo rate where parent level TCA is applied.
What are the key features and functionality of the solution?
The Staged ‘parent’ algo order mimics how a client would submit a traditional single algo order from their EMS platform. Once the algo ticket is submitted the workflow and capabilities begin to diverge. Using our Single Dealer Platform, VectorFXTM through single-sign-on (SSO), clients can then split the parent order into multiple child algo orders to run at specific times, in parallel, or simultaneously. Clients can add, remove, amend or cancel any child algo orders at any time within the Staged order.
Each child algo order acts like a single algo order with all the flexibility, transparency and control already available. Clients can pause, amend, access to real time TCA and engage live risk transfer pricing in critical moments. As the child algo orders are filled, the original parent order on the platform is also updating in real time displaying the aggregated fill amounts and average price of all the fills of the child algo orders.
Clients can also pause/cancel all the child algo orders at once on the parent order level if the need arises. Upon completion, we will generate an enhanced TCA report which shows aggregate slippage against benchmarks for both the parent order and each child algo order.
What has been the client response so far?
Client feedback has been overwhelmingly positive since the Staged Order rollout. Initially, the Staged Order was only available through one EMS platform. But during our client interactions a common theme emerged – working orders on platforms is difficult due to the inflexibility of the EMS GUIs. We responded by expanding the Staged Order to nearly every platform in our eFX distribution network.
You recently made additional enhancements following client feedback. What are the latest changes?
We have incorporated the ability to deal directly on our streaming risk transfer price within the Staged Order. This enhancement provides flexibility to use both algos and risk transfer pricing on the same Staged order. Another enhancement driven by client feedback was to add “linked” rules based orders. These orders are designed to auto start following the completion of a specified child algo order.
If desired, the client can elect to move any unfilled notional of the previous order to the following order automatically. Previously clients had to attentively watch a running order and wait until completion before launching the next algo strategy. Now they can set up the rule within the Staged order and the system will take care of it.
What do you expect the coming year will hold for the FX algo suite?
Our focus is always on enhancing our client experience and tailoring our algo offering to help with client execution needs. We continue to improve our algo performance by enhancing our analytics with new propriety models and leveraging our unique real money franchise to provide quality liquidity to our clients. So watch this space!