BNP Paribas recognised in three categories at the 2022 Best Banks Awards

Amid the market commotion of the past several years, BNP Paribas’ FX franchise has weathered the storm and proven its scope and strength to become one of the top liquidity providers in the industry

Leveraging its early success in the algorithm space, BNP Paribas has created a full-suite FX franchise that has gained remarkable traction in recent years. Since the outbreak of the Covid-19 pandemic, the bank’s FX electronic business has performed especially well and has significantly increased its market share of electronic volumes across all e-FX products in the industry. BNP Paribas now stands among the top four e-FX banks in the market, according to the primary industry volume survey on electronic FX volumes.

“Being among the top four e-FX houses on the Street is a huge achievement for us,” says Joe Nash, electronic chief operating officer for global macro at BNP Paribas. “This was particularly driven by our swaps business, which has grown dramatically over the course of the two preceding years [to the survey’s publication].”

Volumes in the swaps e-book have trebled since 2020, with flows regularly reaching 100 yards a day on the back of a larger selection of currency pairs covered, as well as enabling larger trades and longer-dated risk positions to be taken.

Key to this success is the continual investment in the e-book and its integration with the voice desk, which helped the bank make consistent prices during the pandemic-induced trading frenzy in the early part of 2020. The bank essentially took a page from its top-of-the-line, automated spot market-making platform, and introduced these same concepts to its forwards and swaps e-book. The book is now fully automated, including pricing, risk management and hedging algorithms. This has brought greater confidence among clients, who have flocked to the platform in increasingly large numbers.   

“It’s a virtuous circle,” says Nash. “Once there is volume going through the e-book, we can quote tighter prices quicker, which then brings in more client flow. And, with more liquidity going through the e-book, clients have the confidence that they’ll be able to get out of positions quicker when they go into the book. In turn, we can quote tighter prices and attract more flow. As a result, BNP Paribas’ e-book is now firmly ensconced in the top FX banks on the Street. This has been a huge achievement by the e-FX desk.”
 

Creating an ecosystem

The success of BNP Paribas’ e-book in recent years is part and parcel of a larger concerted effort from the bank to create an FX franchise that spans products, client types and geographies. Conscious that a one-product bank will not attract a large swath of clients, BNP Paribas set out a number of years ago to put together, piece by piece, the building blocks of an extensive and robust FX ecosystem.

“It takes time to create the building blocks to succeed within that ecosystem,” says Neehal Shah, Emea head of global macro institutional sales at BNP Paribas. “The key is to create a point of differentiation, which is what we did initially with the algo business. We then set out to create relevance with clients throughout the business cycle in all product areas because, ultimately, clients reward us for being an overall partner to them in the business, rather than being a niche player.”

That commitment to clients throughout the business cycle is an important part of BNP Paribas’ long-term approach. Another important aspect of this strategy is to diversify its client base so that a large portion of its FX flow – EUR/USD and other currency pairs – can be internalised within the bank, thereby reducing market impact and minimising spreads.

But what’s important in the end is being there for clients when they most need it. Being there during periods of low volatility, when liquidity is abundant, is easy to do says Shah, but it’s when liquidity conditions are constrained that a provider’s true worth is revealed.

“Being a partner to our clients means being there when things get a little bit more difficult and when the quality of liquidity is priced at a premium. Ultimately, it’s about providing liquidity and balance-sheet support, making sure there are no outages and that pricing is quick. Those are the reasons clients come to us throughout the business cycle,” he says.

“Across the full FX product spectrum, we have truly differentiated ourselves, and our clients know that when they want to trade – particularly in stressed markets – we are there to provide them with the crucial liquidity they need.”

With no shortage of stressed market conditions and crises, clients have, in the past several years, experienced first hand the full strength of the FX franchise BNP Paribas has built. During these crises, clients were able to test the resolve of liquidity providers across the entire FX industry, and the teams across BNP Paribas’ FX franchise performed admirably, as trading volumes suggest.

But being able to deliver consistent service and liquidity for its FX clients is but one aspect of the bank’s commitment to its overall client base. Shah points out that BNP Paribas’ FX franchise is strong because it is part of a broader master plan to be the top European bank. As such, the bank is present in all of the world’s largest trading centres, as well as in regional capitals and emerging markets, and in all asset classes.

“With our aim to be the number-one European bank globally, our strategy covers all product areas and not just FX,” he explains. “When we enter a market, we do so with our full suite of products, and FX is a strong beneficiary of that strategy.”
 

Cortex: a unique offering

To drive forward its objective of differentiation among FX banks, BNP Paribas has made significant investments in improving the user experience on its single-dealer platform Cortex, so that it becomes essential on traders’ desktops. While continuing to price competitively, Cortex has been revamped over the past couple of years to offer a wealth of new functionalities and value-added solutions. All complex processes have now been integrated into the platform, including pre- and post-trade allocations, order management and execution systems, research and analytics, and connection to all straight-through processing providers, making Cortex an all-around FX platform.

Among the most innovative solutions incorporated into the platform is the trading assistant ALiX, which allows traders to type in a request – whether it’s a spot ticket, complex option, market colour or to contact a salesperson – in normal human language and, provided it’s in a parlance that is used and understood by a normal market participant, it will be understood by ALiX. If the request was for a spot transaction, ALiX will open a ticket for the client with all the details of the trade ready to be approved and executed.

And, to save precious real estate on a trader’s screen, ALiX has been designed as a toolbar that can be opened with one click and automatically closes when the request has been completed. In a similar fashion, Cortex itself can be accessed directly via the Bloomberg terminal for market participants that do not want a myriad of applications populating their workspace. This feature allows a client to manage all of their trades – no matter where they originated – through a Cortex window on Bloomberg. Its popularity has spread, and many multi-dealers have now requested orders originating from their platform be available through the Cortex execution manager.

The ability to populate and manage orders from different platforms in a single application has been a game-changer, as it now serves as the backbone of yet another innovation in BNP Paribas’ FX arsenal. Branded as Rex, this innovation is a portfolio basket hedging algorithm that manages a client’s orders – regardless of origin – according to a market participant’s particular objective. Based on the trades in the basket, the algo presents the client with an execution plan, which they can preview on a chart. Once the client consents to the plan, Rex will execute the basket as agreed and, during the entire execution process, clients can interact with Rex and pause or change how the trades are managed as necessary.      

“This is a whole new user experience for clients,” explains Asif Razaq, global head of FX algo execution at BNP Paribas. “It’s the birth of what we call the fifth-generation complex workflow algo. Rex is a master algo, which controls other execution algos to manage the execution of a basket of orders. All clients have to do is inject their orders into the application and use Cortex to manage the entire execution process.”

Rex has been a huge success for BNP Paribas. It was initially targeted at asset managers to help them optimise the countless trades they manage across many currency pairs and funds but, to Razaq’s surprise, corporates have become rather fond of the master algo. Rex helps them understand how to execute, in an optimal fashion, the few end-of-month or end-of-quarter large currency trades they conduct.   

While some asset managers and corporates execute through Rex as a default, others use it as a consultation tool to see what recommendations the master algo actually provides. But, as Razaq points out, nine times out of 10, clients go ahead with Rex’s suggestions rather than executing the trades themselves. Rex is a prime example of the innovation that has transformed BNP Paribas’ FX franchise into one of the top liquidity providers in today’s FX industry.
 

BNP Paribas was voted Best bank for EUR/USD, Best bank for e-trading and Best bank for regional/domestic banks at the 2022 FX Markets Best Bank Awards.

Sponsored content