Whether the primary goal is to capture price improvement, minimise market impact or achieve optimal execution by reducing overall transactions costs, Commerzbank’s algorithmic strategies employ logic to execute orders efficiently, whilst maintaining anonymity in the market. We asked Nickolas Congdon, Director and Head of eTrading Services at the bank to tell us more about the type of FX algorithms it offers.
Why are increasing numbers of Commerzbank’s clients considering algorithmic FX execution and what attributes does the bank have that put it in a good position to meet this demand?
Clients are increasingly aware of the substantial benefits to their bottom line through the use of algorithmic execution. It doesn’t matter if it’s referred to as alpha or savings, algos provide an important tool to create real value for clients. Leveraging our extensive experience with algorithmic execution, we’re uniquely positioned to help steer clients through these uncharted waters.
We’ve a team of in-house quant traders who are continuously developing next generation algorithms and from which our client algo business was born. We’ve developed a service which empowers clients with the right tools to navigate through the increased market volatility while reducing their overall transaction costs.
What types of client are showing interest in your FX algos and what key benefits do they get from using them?
Over the past five years clients have been educated around the value proposition of execution algorithms. This was evident towards the end of Q1 2020 as volatility increased with spreads sharply widening and several of our corporate clients used Tracer, our adaptive strategy.
We’re committed to minimising our clients’ execution costs through decreasing the amount of spread paid, and minimising both temporary and long term market impact. By being involved in these transactions, we’re able to better analyse and customise each individual client relationship using our proprietary technology to provide a tailored solution for their execution requirements.
What steps are you taking to enhance your FX algo suite and optimise the availability of the strategies you offer?
As electronic markets become increasingly data driven, Commerzbank created a quant trading research pipeline complete with an in-house developed simulator that allows our team to take alpha driven concepts from idea inception to production while analysing each algorithmic parameter across varied market conditions. We’ve strategically developed strategies with the aim of simplifying and empowering clients with the right tools to make informed order routing decisions.
Transparency is the cornerstone of our eTrading Services and we continually encourage our clients to quantitatively evaluate the performance of the strategies across providers and actively support third party anonymised peer benchmarking.