Following on from the launch of its ORCA-Direct algo last year, UBS has introduced ORCA-Pro, a new GUI targeted at clients frequently using ORCA-Direct to execute FX.

The ORCA-Direct algo tries to maximise the amount of liquidity available to users when executing FX by looking across ECNs, UBS’s principal liquidity and CME’s FX futures. The algo also uses quant-based research and machine learning to measure the value of liquidity that is subject to last look versus that which is firm, directing trading activity through the most optimal channels possible based on this assessment.

Having received positive feedback regarding ORCA-Direct, the Execution team at UBS began thinking about other ways to help clients improve their FX execution, and they decided that not only does the order itself needs to be optimised, but also how the client enters that order into the market.

Mark Goodman, UBS

“Some clients are using multi-dealer platforms, and we plug into that. For these clients, workflow is about having one multi-dealer platform and being able to use it quickly. However, what we realised was that there’s a segment of clients who valued this type of execution, but of equal importance to them was actually how they can put the order in, which is where ORCA-Pro fits in,” Mark Goodman, head of electronic execution at UBS, tells Profit & Loss.

He continues: “So then the question became: how can we provide a single-dealer platform that links into that optimisation engine but actually reduces the slippage – not just from trading, which the engine does – but also from the client’s interaction? That’s why we went from looking at the liquidity landscape and how we can trade as effectively as possible to then looking at the client’s desktop and figuring out how to give them the best possible experience so that they can reduce slippage there as well. That’s what ORCA-Pro is all about.”

Rather than large, real money firms that might only be executing FX over a longer time frame via an algorithm, the new GUI is designed for clients that are frequently feeding in new orders for immediate execution, so typically a bank trading desk or a hedge fund. When it comes to execution, seconds often count for these firms and the staff at UBS came to the conclusion that if the trading front-end isn’t optimised effectively, then the performance of the underlying algo could be diminished to a degree. 

Key to this optimisation, explains Josh Listanowsky, sales trader, electronic execution at UBS in New York, is giving clients a better visual representation of the FX market.

“Clients really like the ORCA-Direct strategy and where this is sort of a new turn is that, rather than fill out an order ticket, type out all the parameters and pick a limit, we’re giving the client a visual representation of the overall market,” he says.

Listanowsky adds: “ORCA-Pro shows the client everything that the smart order router sees for different quantities, so that they’re able to click and trade the way that traders have been doing for most of their careers. A lot of traders aren’t really comfortable with filling out an order ticket, nor do they have time, and so what we’re giving them now is a better view into the market and the point-click-deal trading style that they’re used to.”

Unlike when trading on streamed, principal liquidity, it can be challenging for clients to know the overall outcome of their trading when executing in an agency environment because in the latter they’re sweeping through multiple liquidity pools. What ORCA-Pro does is offer an estimated price for each transaction based on the execution engine’s calculation of the liquidity available across multiple liquidity pools, also accounting for whether this liquidity will be subject to last look or not.

Declan Graham, UBS

“ORCA-Pro isn’t just totting up all of the prices that we see, it’s also looking at the probability of fill on each of those prices, so there’s actually a lot of computational intensity that goes into figuring out the expected price that the client can actually execute at,” says Declan Graham, head of business development for electronic execution, at UBS.

At a time when there is more competition than ever amongst platform providers to get onto clients’ screens, UBS is clearly betting that these visualisation tools are one area where it can really differentiate its offering.

“I think that if you find a spot where you can really add some value visually in a way that you know is not really available on a multi-dealer platform, then clients are willing to create desktop space and put your system on that. We built a very good execution engine that is very powerful for a large part of the market, but for a certain segment of clients, their ability to interact with it is as important as the engine itself. That’s why we decided to invest in this area,” says Goodman.

Graham adds: “I really wouldn’t underestimate the value of screen real estate. We have one client that uses ORCA-Pro to trade an EM pair and they’ve told us that if we can make it three times smaller, then they’ll use it for two more pairs.”

Looking ahead, the UBS team emphasises that work is still ongoing to ORCA-Pro as it receives feedback from clients, although thus far most of the changes have been largely cosmetic in nature. For example, the “mid” buttons are being replaced with “top of book” to save a bit of  confusion as some clients were accidentally clicking on the mid button and then wondering why there weren’t able to find liquidity at mid-market when, by definition, there can never actually be liquidity there. 

“This is an iterative process, something that I think a lot of big banks forget. We delivered the first version of ORCA-Pro in June, but we’re continually working with clients to improve it and so we always planned for continued investment beyond the launch date. Otherwise, these products simply die and that allows a competitor to come in,” says Goodman.

Galen Stops

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