FX house of the year, Japan: UBS

Consistency, reliability, technology and range of products across multiple currencies wins UBS the FX house of the year, Japan award

UBS’s highly competitive and stable pricing across a wide range of currency pairs, over a range of market conditions, were key to it securing the FX house of the year, Japan award. Clients consistently cited the bank as one of their top liquidity providers (LPs) over the past 12 months, with a market share exceeding 10–20%. This resilience in pricing across multiple currencies was particularly important for UBS’s clients in a year that saw FX volatility spike on recurring outbreaks of the Covid-19 pandemic, Russia’s invasion of Ukraine in February and ongoing fears over rising global inflation and interest rates.

UBS’s clients cited the bank’s robust pricing, not just in the major currency pairs traded in the Asia-Pacific region (involving JPY, CNH, AUD, NZD and HKD) but also in minor Asian currency pairs (including KRW, SGD, TWD, INR, IDR, and PHP) and in other emerging market (EM) minor currencies (notably TRY, ZAR, MXN and HUF). The past 12 months saw UBS winning significant wallet share from clients in each of these currencies. This was based not just on the depth and breadth of its currency trading coverage in extremely challenging market conditions, but also on the provision of advice and support from the bank’s global and regional sales teams, ensuring smooth and efficient client coverage.

As an adjunct to consolidating its market-leading position in spot FX, the past 12 months have seen UBS build on this to expand its newly launched electronic non-deliverable forwards (NDFs) business. This involved UBS expanding its currency coverage and showcasing the strength of its electronic platform, as well as actively engaging with clients to advocate for transparency in an ever-fragmented electronic trading market. These efforts included the electronification of pricing and liquidity management, specifically for NDFs and EM currencies, which has resulted in higher streaming amounts and tighter pricing. UBS has also worked rigorously to reduce latency where possible, and has even embarked on encryption removal projects to reduce one-millisecond latency.

At the core of this seamless coverage for clients across currencies, jurisdictions and products are two key elements UBS regards as crucial to its past, present and future development: technology and thought leadership. In the case of the former, we can look back to late 2017, when UBS embarked on a mission to revamp its electronic trading platform based on the feedback received from clients and its trading performance. Within a year of that decision, UBS used a microservice architecture to build its new low-latency Trading, Risk Management and Electronic Execution (TREE) FX trading platform. This allowed UBS to release changes with minimal disruption to ongoing service, which ensured it could rapidly deliver functionality.

The first phase of TREE was launched over the course of 2018 to UBS’s application programming interface franchise. During development, the bank was careful to customise its approach to servicing its clients optimally, tailoring various aspects of pricing – such as the update frequency, spread, skew and liquidity – to individual client needs. Building on the positive feedback received from clients, UBS continues to grow this business in TREE through building sophisticated algorithms in areas of low-latency pricing, portfolio risk management, information leakage detection and market impact models.

The other key element to UBS’s seamless FX coverage is the thought leadership it brings to its business, providing in-depth research and analysis. One recent notable example of this was a case study on LP selection, in which UBS closely examined which topics are the most pertinent to its clients in an increasingly electronic ecosystem. In the study, UBS analysed precisely why LP selection is fundamental to optimal execution, and provided guiding principles for its clients to vet market-makers before partnering with them.

In a similar vein, UBS played a significant role in formulating the guidance paper by the Global Foreign Exchange Committee on last look trading within the global FX market. This paper set out the principles of good practice for last look trading and provided illustrative examples. UBS was one of the first major banks to publish the disclosures cover sheet confirming that it does not apply ‘additional’ hold times while applying last look.

UBS is also actively engaged with professional industry bodies such as the Investment Association (IA) and is due to provide enhanced information to its clients as part of the IA’s proposal on Standardisation of reject codes in FX trading. While taking a key role in these initiatives, UBS has conducted online workshops and panel discussions to update clients with the latest technology, trends and analytics, while making them available online. This has been welcomed by all of its clients, but especially those in countries where face-to-face meetings were prohibited due to Covid-19.

 

UBS was named FX house of the year, Japan at the 2022 FX Markets Asia FX Awards.

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