Awards: UBS

Swiss banking giant UBS has long held a reputation for being an electronic-trading powerhouse as a result of its single-dealer platform, Neo. But, over the past year, the dealer has invested further in its platform as it seeks to upgrade the user experience.

UBS deployed a new breed of algorithms and launched several second-generation exotics, as part of a broader overhaul of Neo’s FX options capabilities, in a bid to leverage technology and infrastructure updates carried out by the bank in the run-up to the second Markets in Financial Instruments Directive.

“There was a clear focus in the last year on investing in technology to ensure UBS Neo was regulatory-compliant in the wake of Mifid II. The transition to the new regime was smooth for our client and us, which is a success for the company,” says David Billingham, executive director at UBS.

“From a technology standpoint, this translated into an acceleration in the upgrade and rationalisation of our IT systems, which empowered us to improve our electronic value proposition; for instance, by delivering to our clients a best-of-class offering for second-generation exotics,” he adds.

UBS has been voted the winner of the Bank Algorithmic Trading Technology Provider of the Year, the Bank e-FX Initiative of the Year and the Most Innovative Bank e-FX Platform of the Year categories at the 2018 FX Week e-FX Awards.

There was a clear focus in the last year on investing in technology to ensure UBS Neo was regulatory-compliant in the wake of Mifid II. The transition to the new regime was smooth for our client and us

David Billingham, UBS

Clients are now able to access target-redemption forwards and pivot-and-range target payout forwards as easily as they can trade cash products, while features such as optional conditional protection, cap loss, term sheets and fully customisable schedules provide greater flexibility.

UBS will add accumulator forwards this year to complete its FX derivatives product suite.

An even more significant change will mean the internal teams at the bank and clients will see a unified view of the platform, enabling UBS to distribute all of its FX derivatives products electronically.

The upgrade will also give clients access to a range of products electronically that were previously only available as voice-traded instruments, such as multi-currency products.  Pricing tools that were restricted for internal use will also be made available to clients.

“In the wake of Mifid II, more clients have started to trade on electronic platforms; our e-options volumes have doubled from December to January. We are also seeing a growth trend in the average ticket size of the options traded online,” says Billingham.

“Clients are also more confident in trading exotic options via e-channels. Last year exotic options traded electronically were roughly 15% of the total volumes – now they are 30%,” he adds.

Diversifying liquidity

UBS has also made pivotal changes to its liquidity offering. The electronic execution business offers clients a range of algorithms to work orders, but, until recently, access to UBS liquidity was the driving principle behind these algos. In a bid to expand its liquidity offering to clients, the bank developed a new smart-order router dubbed Orca, which stands for optimal routing control algorithm.

The first algo is Orca-Direct, which gives clients access to a wide variety of liquidity sources, including ECNs, futures and the bank’s principal price.

“The release of Orca-Direct marks the culmination of a busy 12-month period for the FX execution team at UBS, which has also seen the availability of multi-venue liquidity to the FX algos for the first time,” says Mark Goodman, managing director and head of electronic execution at UBS.

“Orca-Direct represents a step-change in our algo offering and the client feedback since launch has been very positive. The ability to access futures liquidity, coupled with demonstrable savings versus taking a risk price, is something that has very much resonated with our clients,” he adds.

The algo combines machine learning-driven analytics with synchronised order placement, making Orca-Direct a good match for clients that need to be filled urgently. The bank has now enabled all of its algos to use the Orca technology for liquidity access and it will continue to develop analytics capabilities too.

Meanwhile, over the next 12 months, UBS will redesign Neo into HTML and continue to roll out new products, features and analytics capabilities.

“An effective algo is only half the puzzle,” says Goodman. “We are continually focused on how to improve the overall execution experience for clients – something that includes enhancements in pre- and intra-trade transaction cost analysis, as well as the post-trade process,” he adds.

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