Mary Leung

State Street unveils Percentage of Volume algo feature

February 2024 in Top Stories

State Street recently integrated a new Percentage of Volume (POV) feature into its flagship FLOAT strategy. Mary Leung, Global Head of Client Algos at State Street, shares how the POV tool further enables clients to control the pace of their execution and reduces market impact by further defining desired market participation.

Can you please explain the new feature and its particular benefits to the client?

The introduction of our POV feature to the FLOAT algo strategy enables our clients to define the proportion of real time market volumes they are aiming to achieve through algo execution. Our clients are sophisticated, each with their own algo execution philosophy and individual trading goals. The POV feature allows them to configure the algo uniquely, using real-time volume market estimates. 

We made the POV a component of FLOAT as opposed to a standalone strategy to align with our philosophy of providing clients with succinct, yet sophisticated, algo strategies which aid ease of use. We predefined different POV bands based on different execution styles i.e. passive, normal, aggressive etc. However, in keeping with all our algo strategies, clients desiring more algo control can override these pre-defined bands and set their own POV conditions to match their execution goals.  

Dynamic elements exist within the strategy that allow the POV to slightly speed up or slow down based on being in the money (ITM) or out of the money (OTM) from arrival price. In congruity with our other strategies, POV can interact with our Peer-to-Peer Interest Match (IM) liquidity. Interest match fills can be used in-line with the POV constraints, or clients can override the POV limits by using the Observe POV w/Interest Match option. When disabled, it ignores the participation rate constraint when Interest Match liquidity is available, i.e. the Interest Match volumes are not counted towards the participation percentage.    

When did you roll out the new feature?

We released the POV feature via FXConnect, BBG, FXALL, FIX API and our Single Dealer VectorFX in January 2024 and will continue to roll it out to other third-party vendors over the next several months.

What has been the client response so far?  

We build our algo offering to suit our clients’ needs. The POV component of FLOAT is built for our hands-on clients who need the flexibility to control execution parameters in the algos, targeting a more nuanced outcome. As FLOAT already had an underlying POV component to it, it was a natural next step to deploy a customisable POV function. Clients have certainly taken the opportunity to utilise the new POV feature since its release in January and have given positive feedback around their execution results.

Is this part of a wider build or new development for the overall FX algo suite?

We continue to develop and evolve our algo suite to meet client demands. Since we launched our current generation of algos in 2019, we have deployed our FLOAT strategy, Sweep & Post strategy, Portfolio Algo strategy, and our Staged strategy – which is an algo of algo workflow solution offering flexibility and rules based execution. We enhanced our TWAP/VWAP to execute in a ‘smart’ capacity and have fully developed our SDP VectorFX algo hub into an app that provides greater transparency and an enhanced algo user interface. One of our most popular algo features, our Peer-to-Peer Interest Match liquidity, now works with all our existing algo strategies and leverages our significant Real Money FX presence to increase peer-to-peer trade execution on multiple fronts.

Do you have any other innovations or new developments planned for the coming months?

We have several new enhancements that we are excited to bring to our clients in the near term, including new sources of Interest Match liquidity, Portfolio algo enhancements, NDF Algos, pre-trade TCA, among other features and have also begun exploring the use of our algo framework in the forwards/swaps space. We are excited for the continued development of the FX algo market in 2024 and beyond.