HSBC Rolls Out Two FX Strategies

HSBC has rolled out two new products in its FX business, one a new floating order type, the other a basket algo.

The Floating e-Liquidity order allows the bank’s institutional clients to place a floating order with its principal liquidity via an API. It has been launched as part of HSBC’s Global Intermediary Services offering, and effectively sets clients up as liquidity providers to HSBC enabling them to transact on an anonymous basis with the bank’s principal FX desk, across 20-plus direct currency pairs and non-deliverable forwards. This allows clients to work orders within HSBC’s bid-ask spread, the bank explains.

Clients show their interest to HSBC by pegging their orders to the bank’s mid-market price and controlling the spread therefrom. The bank says its mid-market price is determined in real time from the mid-market rates of external primary trading venues.

“Through the HSBC FX floating e-liquidity order, clients can be a liquidity maker without the cost challenges associated with technology, infrastructure and credit,” explains Vivek Sarohia, global head of FX alternative execution services. “They will have indirect access to HSBC’s overall internal FX inventory, while being able to capture spread, minimise their market footprint and mitigate the risk of adverse selection.  It’s an alternative way for clients to trade FX by making liquidity to HSBC and offsetting risk with the bank’s inventory.”

The bank has also rolled out the HSBC Basket Algo for institutional and corporate clients, enabling them to upload a basket of FX orders into HSBC’s single dealer platform, HSBC Evolve. The basket algo determines how best to net and optimise the execution of that basket, based on the correlation of those currency pairs. It also nets multiple currency pairs into smaller orders reducing bid-ask costs for clients, the bank says. Once the HSBC basket algo has netted the orders, it executes those orders at times during the day according to an optimisation schedule, which is generated by the algo based on the correlation of currencies the client holds.

“We affectionately call it a ‘correlation aware’ algo,” says Sarohia. “The HSBC basket algo looks at the underlying currency pairs that the client is trading and then at their correlation, before executing, accordingly, to reduce risk and costs.

“Clients may trade many currencies – and the HSBC basket algo understands that, so it will look at what happens, for example, if a client trades one currency more aggressively and how it might impact other currency positions the client also holds in their portfolio,” he concludes.