Best Bank Algorithmic Trading Technology Provider: BNP Paribas

Execution algorithms in foreign exchange are fast gaining traction among buy-side market participants, as their desire and regulation-driven need for controlling and monitoring the quality of trades grows. But, along with intense curiosity, there is also an occasional hint of suspicion due to the uncomfortable feeling that comes with deploying black box-style technology.

"We focused on how to differentiate ourselves, as we wanted to build a platform that would provide clients with a rich user experience and change their negative perception of execution algorithms being black box solutions where they had no control over execution," says Asif Razaq, global head of FX automated client execution at BNP Paribas, the winner of the Best Bank Algorithmic Trading Technology Provider category at this year's FX Week e-FX Awards.

Early algorithms emphasised the ease with which clients could click a button and wait for a notification from the system that the order had been done at a certain level. This is no longer enough in an environment where clients see control as key.

Our algo suite was engineered with the goal of providing clients with real-time feedback as to what is happening whilst the algo is executing
Asif Razaq, BNP Paribas

First, clients need the ability to interact with the algorithm and its processes, such as the speed at which it executes orders, to put execution on pause or switch to another algo in mid-execution, based on the user feedback from the system.

"Our algo suite was engineered with the goal of providing clients with real-time feedback as to what is happening whilst the algorithm is executing in the market," says Razaq. "Providing clients [with] control was a big miss in earlier algo solutions."

BNP Paribas is now on its fourth generation of algorithms, which give users access to the data used by the strategies to execute trades, as well as a graphic representation of things such as market liquidity, market depth and trading conditions, in addition to the cost breakdown of different execution methods to carry out a specific trade. This, in turn, helps users to determine the best way of executing each trade under different market conditions.

Full transparency

"We also introduced full transparency by generating post-trade analytics in real time, as we felt clients want to know how well the execution algo has performed straight after the execution," explains Razaq.

It isn't only demand that is growing for execution algos as a result of regulation. Razaq anticipates banks that stayed out of the space until now, in an effort to avoid cannibalising their own market-making desks, may have to consider joining the algo arena as the focus on transparency intensifies.

"We anticipate more business will move over to trading via execution algorithms, because it gives banks an avenue to meet growing regulatory requirements and demonstrates to clients in a very transparent fashion how their trades have been executed, as well as fully disclosing the cost of execution," Razaq concludes.