Algo trading has never been bigger or more content

Algo trading has never been bigger or more contentious, particularly as it grows in the FX space. But with extreme growth comes many questions -- Multi Dealer or Single Dealer Platform? Which algorithm is right? How do I protect my strategy, not to mention my clients, against mirage liquidity? To help answer these questions, TradeTech spoke to Asif Razaq, Global Head of FX Algo Execution for BNP Paribas.

You were on the first panel session of the day, a rather animated discussion on new strategies in FX, how to optimise your trading desk in those markets. What are you doing in the FX and algo execution space?

We're introducing a new product into the marketplace, especially in the FX execution business and over the last few years we have seen an evolution in how people like to execute in foreign exchange. We're entering the marketplace to provide more sophisticated tools to our clients so they can get a much better quality of execution when transactions of large size orders enter the marketplace.

Thirdly, with the evolution of execution algorithms in FX, we see that the market is actually looking now for something a lot more sophisticated. We've seen our FX markets become a lot more challenge in terms of liquidity being a lot more fragmented, transparency being so weak in this marketplace, so really clients are becoming a lot more sophisticated themselves and they're having a lot more scrutiny on the quality of execution they get. We believe that execution algorithms is one of those products that can help them solve those problems.

So your finding now they actually want to take a much more active role as clients on exactly how their trading is executed?

Absolutely; If you look at traditional trading mechanisms, we've seen clients typically had access to trading over voice where they passed the risk over to the bank, or more recently, clients are getting more involved in electronic trading, where they see a price on the screen and they trade. But when it comes to trading large sized transactions, typically clients have been taking control themselves, in the sense that they're breaking the order up and dealing with multiple banks, but they're finding issues with how information gets leaked into the markets and they're seeing sometimes the markets move against them.

So what we're doing now is writing very sophisticated execution algorithms that can intelligently trade markets and consume liquidity without creating too much noise in the marketplace. What clients like to see in that is that they actually want to be in control of that execution -- they want to be the guys that decide that they want to put an execution order in now, because I think the market it poised for the current conditions to work for that type of order.

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