Monday 27 August 2018

BNP Paribas' Global Head of FX Automated Client Execution discusses the latest advances in the bank's FX spot algorithm execution service, CORTEX iX, how it is getting smarter – and what this means for clients.


Asif, what were the key objectives that shaped the way CORTEX iX was engineered and built?
BNP Paribas' vision is to bring simplicity to complex FX markets, much like Apple did with the iPhone and the mobile phone market. Algos are often seen as complicated and we are making them simpler and easier to use. Unlike most providers we have a small 'family' of algos, each with a distinct execution style, so clients can make a simple choice to match their trading strategy.
CORTEX iX employs next generation 'adaptive' execution technology. Why is that important and what benefits does it bring?
We pioneered the concept of adaptive algorithms, which respond to changing market conditions during execution, way back in 2012 and have been refining their performance ever since. More recently we have incorporated Artificial Intelligence (AI) into the strategy; our algos are now learning how the liquidity environment reacts across venues, building a knowledge base, and optimising their strategy for each trade. I actually studied AI for my Master's degree so it is really exciting to apply research based AI into our algo suite. This is a fascinating time for algorithmic execution and we are really driving the evolution of the market.
The BNP Paribas family of algorithms
What are the primary reasons that increasing numbers of your clients are looking to use CORTEX iX?
MiFID II has totally changed the landscape for FX execution and has redefined the way clients see algorithmic trading. Algos naturally lend themselves to MiFID's heightened transparency requirements by automatically providing granular digital analysis of their execution. Ours not only deliver this immediately post-trade, but even offer live, mid-flight benchmarking.
Clients are also keen to maintain control of their execution even when using algos and that's why we have added features that really put them in the driving seat. For example 'Get Me Out' lets users immediately suspend any given algo trade and complete orders at a predetermined price, using BNP Paribas' risk transfer pricing service. Being able to deliver on these transparency and control factors has driven an enormous boost in volumes executed on CORTEX iX this year.
"Algos naturally lend themselves to MiFID's heightened transparency requirements by automatically providing granular digital analysis of their execution."
Please give us some examples of the range of strategies that are now available with CORTEX iX to suit differing execution needs.
The defining feature of CORTEX iX is simplicity. Although each algo has additional features and control elements on its interface, ultimately there are 3 to choose from with clear execution styles. Where some of our clients require a more customised experience, we've built that into our existing suite with a service called 'Flex iX', which offers bespoke versions of our algorithms built for individual clients. Clients will benefit from all the features of the original but at the same time have access to the bespoke features that meet their specific style and risk appetite.
How much flexibility does CORTEX iX offer to let clients pre-define how an algorithm will interact with the market and control their orders at every stage of the execution cycle?
Algorithms are designed to run on auto-pilot during execution. Most algorithms operate with limited information and control provided to the client. As I mentioned before, our clients have shown that they want more flexibility and more control. That's why we've built additional features for each algo where clients can set a number of parameters and adapt them before or throughout execution. 'Get Me Out' is one, another example is Iguana's Speedometer, where the algorithm is providing the client with live feedback on participation levels of the execution in real-time, or Chameleon's Rapid Fill which lets you morph the algorithm into a more aggressive strategy with a single click. It's these add-ons that enable us to offer a simple proposition of 3 algos with all the customisation and flexibility that the clients want.
What functionality does CORTEX iX offer to let clients know how well the execution algo has performed straight after the execution?
Our post-trade analytics provide clients with an accessible, comprehensive breakdown of their transactions immediately after execution. We also recently, announced a strategic partnership with BestX, an independent TCA provider, so our clients receive additional credibility and assurance on their reports.
However we go far beyond the standard post-trade TCA. First we extend the service to cover not just single trades but whole portfolios, giving clients analysis on how to optimise their trading strategies over time. For example we had a client who tended to trade at market open, where there is limited liquidity. Thanks to the portfolio TCA they received from us, they were able to identify this as an issue, adjust the timing of their execution and have a better outcome.
TCA: an algo eye view

We also cover every part of the trade lifecycle. Our pre-trade analytics tool, Insight, simulates the execution of a specific order in varying market conditions ahead of execution, presenting multiple options including forecasted performance metrics for the 3 algos.
We will soon launch 'Insight Live', enabling the client to view and respond to real-time information on execution conditions. This gives the client an 'algo eye view' of the liquidity landscape alongside live benchmarks for their execution.
Let's talk about liquidity. How does CORTEX iX aggregate this and make it available?
It is one thing having access to liquidity, but the art of trading it is something else. This is where the AI is really effective because the algos are self-learning when they analyse how venues act in certain trading situations and can prioritise liquidity pools based on their own knowledge and the specifics of a trade. By combining clients' trade parameters with their own market analysis, algos are able to achieve the optimal outcome.
Turn up the volume: iX volume increase year-on-year
iX Overview for Spot/OR | Global Overview | Average Daily Dealt Volume.
Source BNP Paribas. Indicative data.

How does CORTEX iX help clients to maintain anonymity in the market and minimise the impact of their trades?
All iX orders are managed by BNP Paribas' Automated Client Execution (ACE) desk. This desk is fully segregated from the market-making desk both physically and structurally in terms of the organisation. Trades are executed in the market under a generic BNP Paribas dealing code, ensuring that no client activity is seen in the market place. Even after the order execution, clients can choose to withhold trade confirmation from certain areas within the bank.
How and where can companies learn more about the key features and benefits that CORTEX iX provides?
We have a dedicated eFX team and we welcome client enquiries. We can demo the platform and train exaction traders. In addition we have spent time working with our clients, compliance and management teams, walking them through every aspect of algorithmic trading, so they're fully comfortable with CORTEX iX and ready to begin!
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