Oleg Shevelenko

Bloomberg expands FX algo and analytics coverage

June 2023 in Top Stories

In addition to the growth in FX algo use on Bloomberg’s FXGO, clients are also becoming increasingly sophisticated and interested in more advanced functionality, analytics and using algos to execute instruments outside of spot. Oleg Shevelenko, FXGO Product Manager at Bloomberg, explains how the platform works closely with algo providers to ensure that its algo offering remains cutting-edge.

How has the algo offering and related toolsets developed over the past year?

Driven by a need to reduce the cost and increase the efficiency of trading, algos emerged as one of the mainstream ways for a broad spectrum of clients to access the market. Algo offerings are no longer only the prerogative of major banks, as regional and non-bank providers are stepping in to offer their expertise to a growing population of clients. More than 40 providers are now offering algos on FXGO across close to 200 strategies. Initially, clients were relying on their algo providers to manage orders from start to finish. However, today many are taking a more active role in their order management as more data about algo behavior becomes available. Often clients would start their order execution with a passive strategy to capture the spread, and then gradually re-adjust to more aggressive ones to meet their desired time horizon. Therefore, advanced execution options such as in-flight strategy amendments, pause and resume features, and the ability to immediately fill the order became essential and are actively used by FXGO clients.

How do you help support algo clients to meet their liquidity access needs?

The fragmented nature of FX liquidity is one of the primary reasons for the rise in algos as they allow clients to access multiple liquidity destinations via a single strategy. However, additional liquidity is not an immediate guarantee of a better performance. As fill level venue analytics become more mainstream – showcasing various nuances of liquidity microstructure – clients are looking to incorporate this knowledge into their execution by controlling and customizing the pools of liquidity available to algos. We continue to work with liquidity providers to offer those customizable liquidity options and collect execution statistics related to each venue to feed into the TCA process.

What support do you offer for algo execution in instruments beyond spot?

As FX instruments beyond spot, including Forwards, NDFs and Precious Metals, are becoming increasingly more electronic from both pricing and hedging perspectives, liquidity providers are able to expand their algorithmic offering to cover those instruments as well. At this juncture, close to 20% of order execution on FXGO is performed in instruments other than spot. It is worth noting that as a large percentage of algo orders are passive they also enhance liquidity, which is especially beneficial for less liquid instruments.

How have you enhanced your FX algo analytics products to support the increasingly sophisticated demands of users?

As each algo provider offers a whole range of strategies with proprietary parameters, clients are looking for tools to help them navigate and rationalize this complex environment to allow for more intelligent decision making prior to and during the order execution. Bloomberg’s Algo Analytics hosting service helps address this demand by allowing providers to host their pre-trade and running order analytics within the order execution workflow of their FXGO clients. At present, there are 5 algo providers offering their integrated analytics services for their clients to leverage. In addition, FXGO is now fully integrated with Bloomberg cross asset TCA offering (BTCA) to allow clients to analyze their algo execution against various Bloomberg market data sources and benchmarks to further enhance their pre-trade algo provider and strategy selection.

Do you have any future developments or areas of focus looking ahead that you would be happy to share?

Partnering with our existing algo providers and onboarding new ones to expand our instrument coverage into emerging markets, NDFs, precious metals and derivatives is going to be key. We are also excited to work on the next generation of pre-trade decision support tools to integrate our composite pricing, news, analytics and cost models into all relevant trading workflows to optimize and automate the trading process for our clients.