Bloomberg’s launch of a new analytics hosting service for algorithmic orders on FXGO rationalises the trade workflow as market participants look to make greater use of automation and data insights.
“We’ve seen algo trading increase significantly among our FX clients over the past five years and our expectation is that we’ll see an ongoing growth in that product and that’s why we’re positioning and making investments in these analytics tools,” says Damien Vanderwilt, global head of FICC execution services at Goldman Sachs. The US investment bank will be the first to use the technology for its pre-trade, in-flight and post-trade analytics.
“The key to the war being won centres around not just the performance of your execution tools and algorithms but the tools that evaluate that performance and making those tools and that information available to clients,” says Vanderwilt. “That’s still in its infancy across most of FICC, and the place in FICC that’s the most advanced in algo is FX – outside of futures – and there really is an underweight of trading decision support tools for investors to use when they’re executing in currencies.”
When placing orders FX clients have used trading decision support functions on the bank’s Marquee platform and Bloomberg’s FXEM or FXGO for the order blotter. Now everything has been brought into FXEM and FXGO, where traders can see the pretrade algorithm analytics, assess the chosen algorithm in flight – making any changes in the same place according to predefined benchmarks – and when the algorithm is complete the strategy is filed for best execution and evaluation of trader performance.
For Tod Van Name, global head of FX electronic trading at Bloomberg, creating efficiencies is key.
“Technology is playing a much greater role in what clients are requiring for their jobs to become more efficient and to manage workflows in a much more expedient process,” he says. “And what they don't want to do is log into a bunch of different systems and have to look in a variety places for information that allow them to make intelligent trading decisions. So what this solution does is allow them to use the Bloomberg environment to manage their order flow, and use the proprietary information that's available from the liquidity provider – Goldman – to be able to execute those orders.”
The latest report by Coalition recorded a decline in revenues across fixed income, currencies and commodities for the first half of this year, as banks recorded the lowest first half results across all products since 2006. For Vanderwilt, there’s a natural correlation to technological development.
“Certainly in some products when things become more efficiently traded the net effect of that is they become less expensive to trade for the investor and the margin on that business on the sellside can go down. I think that’s something that has happened over the past decade for sure on products like spot FX. As we’re seeing in equities what you’ve seen over time is a concentration of where that wallet goes to fewer players that have the investment capabilities to develop those tools,” he says.