HSBC’s FX Alternative Execution Services has launched a new NDF algo offering called NDFlex – initially available in five currency pairs using a number of strategies.
The new algo suite is offered in the dollar against IDR, INR, KRW, PHP and TWD, and Implementation Shortfall, Liquidity Seeking, TWAP, VWAP, Get Done and Liquidity Plus strategies can be deployed, similar to HSBC’s algo offering in the G10. The algos access liquidity from EBS and the bank’s own pools – Profit & Loss understands that the bank is investigating adding another platform to the list – and are available on BidFX and Bloomberg initially, but the bank expects other venues to be added in Q4 2020.
According to Vivek Sarohia, recently appointed global head of FX alternative execution services at HSBC, the algos have been live since July and have received a good response from clients. “We have been working on developing the NDF algos for about six months with our clients,” he explains. “We have seen, like our peers, a significant uptick in demand for algos and this gave us the validation to expand our offering into emerging markets, which is a strong suit of HSBC.”
Certainly the bank’s strong presence in local markets would appear to offer the new algos a significant advantage given that HSBC’s own trading desks contribute liquidity to its internal exchange and Sarohia believes HSBC is offering a real differentiator in offering more than just one month NDFs. “We have automated our streams across the curve, not just the most liquid one-month tenor,” he says. “Clients can access liquidity out to two years and our algos tap into our internal exchange which provides, we believe, the deepest liquidity pool in Asian NDFs out there.”
It is more than just about HSBC liquidity, however, Sarohia accepts that clients’ best execution policies sometimes demand a broader liquidity pool. “We are confident that our liquidity in these markets is unparalleled and offers clients the opportunity to really minimise their market impact, however, we also acknowledge that access to external liquidity is equally important for them at times.
“Our internal liquidity pools are treated in exactly the same way as external by the algos,” he stresses.
Sarohia also reveals that the positive take up has been from around the globe and across the client segments, “We have been pleased with the level of demand,” he says. “Especially from our global corporate base.”
Looking ahead, HSBC plans to add access to Latam NDF markets to the offering, starting, most likely, with Brazil, the addition of which, Sarohia suggests, would give the bank a first in the algo space. It would also, he adds, be breaking new ground when it adds access to euro NDF crosses in the coming months. The bank is also keen to expand the range of third-party venues over which it can offer NDFlex, however that very much depends upon when those venues actually start to support NDF algos.
“NDFLex has been built to reflect its name,” Sarohia observes. “Our clients wanted a product that was as flexible as possible in terms of how they select their strategies and liquidity sources, as well as what tenors they can trade. Emerging market liquidity provision is a specialty of HSBC and NDFlex is a key development as we evolve our service in these markets.”