Best bank FX liquidity provider: UBS

UBS’s focus on technology, innovation and client requirements wins it the Best bank FX liquidity provider award

Over the past year, UBS’s bank clients consistently rated it one of their top two FX liquidity providers (LPs), with a market share that exceeds 10–20% each month across various currency pairs. During this time, UBS’s pricing has remained competitive and stable, regardless of market conditions, and the bank’s strong sales coverage has further supported the franchise by ensuring the business runs smoothly and grows steadily. UBS’s reliability as an FX partner in the Asia-Pacific (Apac) region was evidenced over the past 12 months by its ability to provide clients with continuous access to FX liquidity throughout the challenging periods of the Covid-19 pandemic and the Russian invasion of Ukraine. The seamlessness of its service was well recognised, with UBS continuing to acquire new clients across Apac, build its wallet share and enjoy high rankings across major vendor channels.

Underpinning these achievements has been UBS’s FX Engine Room, which allows the bank to place all analytics at the disposal of the global salesforce in one place. Through the FX Engine Room, salespeople are equipped to analyse where UBS can fine-tune its FX products’ delivery to clients. This might include tweaking pricing in response to changes in the bank’s hit ratio, making changes if UBS notices a particular profit-and-loss decay profile in a client’s activity or drilling down into reasons behind failure to quote. By analysing historical trading patterns, UBS can also conduct focused outreach to source offsetting liquidity or to fill specific trading axes as they arise. This combination of responsiveness and adaptability has ensured UBS remains sustainably competitive, irrespective of market conditions, while continuing to finesse its execution, advice and solutions. The bank’s ongoing aim to ensure the reliability of its FX platform has seen it reduce legacy pricing model usage within electronic flows to zero, enabling UBS to provide consistent optimal pricing and liquidity on whichever channel or workflow clients choose.

These capabilities have been enhanced with UBS’s revamping of its electronic trading platform through the build-out of its new Trading, Risk Management and Electronic Execution (TREE) low-latency eFX trading platform. A fundamental principle when building TREE was that it should be done using a microservice architecture, which allowed UBS to deliver functionality at a rapid pace and release changes with minimal service disruption to clients. The first phase of TREE was rolled out to UBS’s application programming interface franchise, enabling the bank to customise its approach to servicing clients by tailoring various pricing aspects, including update frequency, spread, skew and liquidity.

The past 12 months have also seen UBS build on its strengths in spot and short-term interest rate FX by firmly consolidating its market-leading position in those areas. It has also made significant advances in its recently launched electronic non-deliverable forward (NDF) business by growing its market share and expanding currency coverage. In addition, UBS showcased the strength of its platform and business lines by engaging with its clients and advocating for transparency in liquidity provision. One key factor that enabled UBS to achieve strong market shares in these fields included having information leakage detection and market impact models in its TREE platform. Another was the electronification of its pricing and liquidity management systems, specifically for NDFs and emerging market currencies, which resulted in higher streaming amounts and competitive spreads for clients. Over and above the provision of market-leading liquidity in FX, UBS is a leader in conducting in-depth analysis and providing thought-provoking research content to its clients. A recent example of this was its FX Liquidity Provider Selection webinar, which explored why LP selection is fundamental to optimal execution and provided guiding principles on how clients can vet their market-makers.

UBS also played a significant role in formulating the guidance paper by the Global Foreign Exchange Committee on last look trading within the global FX market. The bank was one of the first to publish the disclosures cover sheet, confirming that it does not apply ‘additional’ hold times while applying last look. In addition, UBS is also due to provide enhanced information to its clients as part of the Investment Association’s (IA’s) Standardisation of reject codes in FX trading proposal, to give real-time transparency to its clients on any rejects they receive in line with the IA’s definitions.

“Our depth of liquidity across both the major and emerging market currencies can be seen in our significant market share in Asian NDFs, and central and eastern Europe, the Middle East and Africa spot, as well as bigger streaming liquidity for the Group of 10 to address clients’ needs,” says UBS.

“We are also the first tier-one bank to contribute to the growth and development of the SG1 FX global hub in Singapore by building our capabilities to price and match trades in the new co-location,” the bank concludes.

 

UBS was named Best bank FX liquidity provider at the 2022 FX Markets Asia FX Awards.

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