Portfolio Algo Execution

Goldman Sachs has rolled out its new algo product suite including its NDF hybrid algo – it had long offered an NDF TWAP strategy – but of more interest was its portfolio rebalancing and gamma algos.

We go into the portfolio strategy in more detail in our Closer Look feature, but it should be noted that a rebalancing algo that executes across currency pairs is not necessarily new – JP Morgan offered it some years ago as part of its AlgoX product suite, but the new Goldman product allows a client to rebalance portfolios – something that while popular in other asset classes, has been somewhat overlooked in FX.

The key to the strategy is the dynamic nature of the algo, in that if the preestablished conditions are not met at any time the algo pauses, as well as the fact that Goldman nets off appropriate exposures during the execution to avoid unnecessary trades and, of course, market impact.

A set of traders that are likely to enjoy this strategy are, of course, asset managers, however, options traders may also see the benefit – as they are the second strategy rolled out by the bank as part of its revamp. A gamma trading strategy has been released that uses the bank’s successful and popular Dynamic Hybrid strategy that offers options traders more flexibility and, again we are talking about market impact, a lower profile in the market.

Typically gamma traders are focused on the price action in the market, using the new algo strategy Goldman says they can nuance the strategy so that the algo selects when and how to execute in the market within the customer’s established parameters.

Last year represented a step change in the Goldman Sachs’ FX algo offering, and that is something, given the bank’s broader strength in e-FX, that should make competitors and customers sit up and pay attention. From better analytics, blotters and order monitoring, to a cleaner look on the HTML5-based Marquee 2.0, Goldman has added a superb algo product to an already excellent platform.

Galen Stops

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