Vittorio, the e-FX business has had a very successful year and picked up an impressive number of industry awards along the way. Can you tell us what the drivers were behind this run of key roll-outs?
From my perspective, I’ve been proud to see how the pace of development has continued across all of the FX teams at Deutsche Bank. We’ve been working from home for quite some time and now we’re gradually going back to the office, but it’s been really encouraging to see how well we managed to keep up the levels of engagement with our clients. We’re very pleased to have been recognised with a number of industry awards over this period, including our success in the recent Euromoney FX Survey where we improved our positions in 34 of the 63 categories, and gained 13 number 1 rankings. Our development of new products and rollouts has also significantly increased, despite the challenges of the past year.
On the specifics, the demand for mobile has continued to increase among clients but the pace of uptake has really sped up in recent months. We meet this demand with the cutting-edge Autobahn Mobile for FX app that includes a whole host of market-leading security features, as well as our award-winning Market Colour app.
We have recently launched our integration with Bloomberg, so now clients can access the Market Colour app directly through that platform, which is a new development that has been very positively received. In addition, we will keep going to expand the range of studies available through Market Colour, as well as continuing to further enhance the functionality of the app itself.
Our next phase of development will be focused on pre-trade analytics to make those even more precise, an area which is notoriously complex, but where we are confident we can again deliver an improved client experience. On the TCA front, we’re now connected to all the various third party platforms so if clients want to have the data sent to one of those providers, then that is now possible.
You mentioned increasing the number of studies available through Market Colour. Could you share a little more detail about why that is so important?
Again, what we are doing is all aimed at increasing engagement with our clients. Our new Realised Vol study is a good example of this. In this study, we analysed the realised versus implied volatility over a fairly short-term basis, which is something that no one has really looked at before. That measure is particularly powerful for those clients that trade volatility, for example, by being able to show whether the current vol is being priced appropriately or not. Clients across the board are very interested in the study.
Market Colour is also not focused on just a specific area, such as algo trading, but covers all markets – derivatives, spot etc. That is really where you can engage the client more.
The study itself came about because until then there had been no easy way to understand the true cost of gamma and volatility, such as when you’re trading gamma in terms of your deltas in a portfolio of options or as a single option. In that case, you want to understand if the realised vol is higher or lower than what was implied by the market. The study allows you to look at this in various ways, either as rolling realised vol or sliding realised vol, but either way it shows you where the implied volatility was. The big difference between this and most other studies on realised vol is that we take into account the bid offer that you would actually pay in the underlying market. That gives you not just the mid volatility but also the long vol you pay in the spread, as well as the short vol. Until this study there wasn’t really an easy way to see this visually on a simple dashboard, but now there is.
And have you been doing any development work specifically in terms of adding to the features and functionality of your Autobahn platform?
Yes, literally hot off the press we have a new product release called Principal Resting Order (PRO). PRO is a very exciting as it effectively allows clients to stream FX and precious metal limit orders to Deutsche Bank via the Rapid API. This means that clients now can place orders direct within our own pricing engine which is a very big development, particularly for very sophisticated FX clients. Clients are able to interact with PRO by streaming individual or mid orders and can access a very different pool of liquidity than has previously been available to them. This gives a lot of flexibility to the clients that use PRO as they can now effectively place passive orders, as well as aggressive orders, direct to our book. It is really a powerful tool for users of fully automated systems that want to hedge their exposure or enter into a position.
What changes have been made recently to further enhance your existing FX algo offering?
In the past year we’ve added PRO Liquidity, which allows clients to place PRO orders through our algorithm. This leverages our in-house technology but also expands the number of liquidity pools that the algos can access.
A further key development is the addition of NDFs to our algo suite and so we now offer algo execution across all the Asian NDFs as well LatAm NDFs. We are one of the very few banks that offers Brazilian Real (BRL) BMF1 expiry and we just released the ability to trade the BMF2 expiry directly. This means clients will be able to trade to these two different dates directly with the algos and with our other LatAm NDFs: Chilean peso, Peruvian sol and Colombian peso.
We know that our clients are looking for a one-stop shop for their execution needs. By offering this very comprehensive base in terms of the number of currencies and products available, we are going a long way to meeting that demand. We’ll also be spending more time during the second half of the year further fine tuning and enhancing our execution to ensure we are continually improving outcomes for our clients.
In terms of the wider e-FX business, have you been building any products to support trading in specific FX instruments?
We are currently rolling out a whole new pricing engine for the forwards side of business, and we are really seeing a decent pickup in client volumes and the levels of client engagement.
This has been a success, which is great to see as the team there has done a fantastic job in completely re-engineering our pricing engine effectively from scratch. This supports better precision in our pricing which helps clients to trade more often and enables us to skew our interest a lot more than we have been able to in the past.
In NDFs, our principal desk has made solid improvements in our Brazil pricing. Then on the derivatives side, we’re continuing to do what we’re best at – developing complex options and structures with AOS, our electronic structured forwards offering. AOS is extremely flexible and continues to be very popular with our client base.
In the coming months we’ll be continuing to improve and enhance our current systems, such as further improving algo executions, while also rolling out the new products to our clients.
It’s exciting times, and we’re just getting started.