BNP Paribas’ first expansion area for its algo platform outside of FX will be to offer algos for trading in the futures market. To achieve this, the existing algo suite has been re-engineered to trade futures and listed derivatives in other asset classes, but with the same functionality and core logic that was built for FX algos. According to Razaq, this means clients will now be able to trade futures using an equivalent of the existing FX algo strategy ie Chameleon, Iguana, Viper etc. From a buyside perspective, this also allows clients to see the same algo names available not just for executing FX but across different asset classes, all with a common interface and familiar set of parameters, he adds.
In addition, all of the value-add tools and analytics features which were built for executing algos in the FX space have been ported across to also be available for execution in the listed markets as well. “In markets outside of FX, many of our tools such as real-time analytics and pre-trade TCA have never been seen. Our voice assistant tool, ALiX, will also be available for the new platform,” says Razaq. The move targets two different groups of clients, he adds. The first is existing clients who are already familiar with BNP’s FX algo product, but who also would like to use algos for executing listed derivatives. The second is the group of clients who exclusively trade listed derivatives but do not have any FX exposure and have not seen the existing FX algo offering. “For these clients it will be a real paradigm shift. It will introduce them for the first time to an algo suite that’s providing value-add services, such as ALiX, real-time insight live and our suite of interactive algorithms,” Razaq adds.
BNP Paribas’ voice assistant tool, ALiX, will also be available for the new platform
The move into expanding the FX algo platform to include new futures and listed derivative algos also led to the development of a new feature for using an algo to trade FX futures directly on a futures exchange, such as CME. “In some currency pairs in the futures market, liquidity can be quite scarce,” Razaq says. “There’s often more liquidity in OTC than there is in futures, but we know that sometimes the client has a requirement to carry out the trade as a future. So what do they do? We were able to develop a new hybrid solution called Exchange for Related Position (EFRP), which was born out of now having both futures algos and OTC FX algos available on our platform.”
The new hybrid service solves the liquidity conundrum for the client by allowing them to submit the order for futures notional on the exchange, such as CME, but to select the parameter on the algo ticket for Chameleon to hedge this using the EFRP service, adds Razaq. “Our new Chameleon futures algo will receive the futures order, but because of the EFRP option having been selected it will then ask its equivalent Chameleon algo for FX to source the liquidity via the OTC market. The algo will then calculate the equivalent futures price, reports back to the client to fill the order in futures notional and we report the trade to the exchange. This creates a solution where the client can benefit from the liquidity profile of the OTC FX market while maintaining their order contract to trade a future, which is the first time this has been possible in a fully automated fashion,” Razaq adds.
