UBS – Providing a masterclass on how to combine advanced e-FX trading technology with comprehensive product coverage

May 2022 in Partner Content

Recognised by the market as one of the world’s leading FX houses, UBS continues to take a pioneering approach to its development of technology and services to support the entire lifecycle of the FX trade. Paul Buttenmueller, Global Head, e-FX Trading and Stephan Hoeger, Global Head, e-FX Sales discuss the continuing evolution of electronic trading in FX at UBS and why clients are at the heart of each and every new innovation in the business.

On the trading side, UBS has always been very well known for G10 e-FX & Precious Metals. Yet over the last two years in particular, the bank has also been very focused on building out its electronic offering in emerging markets and also key frontier markets currencies, says Buttenmueller. “Generally, while G7 volumes in FX have in recent years seen little growth, even periods of decline, emerging markets FX and Cs have been growing at pace and we’ve seen strong demand from clients who are increasingly interested in trading EM electronically,” he adds. “Our approach to meeting this demand has been to apply the same technology, pricing and hedging models that we already offer for G10 to our EM suite, both for FX spot and, on the electronic trading side, our new NDF product.”

As a result of this focused growth, UBS now ranks as one of the largest providers of electronic trading in EM FX globally, says Hoeger. He explains that the emphasis has been not only on building out the electronic offering in non-deliverable EM but also on continuously improving pricing and liquidity on deliverable EM electronic tools, including embedding the EM offering more into UBS’s agency suite of algos as well. Alongside the new tools on offer in EM, the business has been developing its suite of frontier market currencies, which now includes electronic trading in many Middle Eastern currencies, including the Omani rial and Kuwaiti dinar, as well as currencies such as the Kazakh tenge and Egyptian pound as non-deliverable forwards.


In terms of NDFs, Buttenmueller explains that key pairs such as the Korean won and Indian rupee are among the more heavily traded currencies and so liquidity is fairly strong. “As they are comparable to a liquid EM pair, it wasn’t that difficult to apply the same model. Volumes in NDF have increased substantially and we are now one of the top liquidity providers for NDFs as well,” he says. “But obviously as we go down the spectrum, you get into the less liquid currency pairs where sometimes you only have liquidity for a limited period of time during the day, such as when the onshore markets are open. If we go even one step further to the LatAm currencies, such as Colombia, Chile, Peru etc, which are just starting the journey of being more electronically traded, then it really becomes important for us to find the right local partners to help source liquidity.”

This ability for the e-FX business to leverage the electronic trading technology that underpins its success in offering G10 and apply that to EM pairs, particularly NDFs, has meant that they were able to confidently grow the electronic trading in a short space of time, notes Hoeger. “We’ve also applied this model to developing other new e-FX products as well,” he says. “It really underpins the great collaboration that we have been doing across the different trading teams, quants, IT, sales, who all work together towards achieving the same goal.”


Hoeger adds that on the algo side, the business is focused on further developing the data analytics suite, both pre and post-trade, driven by strong client demand. The growth in algo use has been steadily increasing over the past two years, he says, and the business continues to develop the algo offering further. “The reason why we are so successful on the FX algo side is because we have such a strong, large principle FX market share and we have coupled that with state of the art smart order routing to a variety of external markets. This gives our clients a unique execution experience to help reducing transaction costs as much as possible,” he adds.

UBS NEO connects clients to market-leading Cash, Derivatives & Algo execution strategies across G10, EM, NDF and Precious Metals


According to Hoeger, there is still strong interest from clients who want access to a single bank platform and the e-FX business have seen record numbers of users accessing Neo in the last two years, particularly during periods of volatility in the markets. “Active FX trading clients, such as other bank FX trading desks, or hedge funds, still want to access single bank platforms like Neo, but we also support many of the multibank platforms as well. Our mantra is that we meet the clients where they want to be met, but ultimately, we feel that particularly for banks and hedge funds, our Neo FX platform is the one to go for in terms of breadth of functionality and depth of liquidity.”


A further recent success story has been the work on UBS T-Pricer, the state of the art options trading platform that clients can access within Neo or separately. “T-Pricer is the options platform that our traders and salesforce use, but it was so popular we took the step of integrating it with Neo and making it available to all clients,” Hoeger says. In addition, the team has launched a brand new trading app for FX swaps within NEO – the UBS e-FX swap grid, which allows clients to see streaming swap prices and displaying trading axes. Hoeger explains. “For FX swap traders this is great because you can click and deal directly from our swap grid and our axes shown are a unique combination from our voice and electronic pricing and global flows.”


In terms of trading, Buttenmueller adds that clients increasingly want to move risk quickly, particularly during times of crises or volatility in FX spot and the daily ranges have increased. On Neo FX, this has translated in clients being more interested in trading larger notional sizes in click and deal, he says. In response, the e-FX business has recently increased the notional amounts shown on Neo FX specifically to allow clients to access that liquidity, especially in times of crisis when they know they can get a trade in in large notional sizes in volatile markets, says Buttenmueller. “One of our unique selling points is our capability to show liquidity even in very volatile markets. For example, we can now stream up to 500mio EURUSD click & deal. We have received a lot of positive client feedback after certain emerging market crises, or after very volatile trading sessions, because UBS was there for their clients,” he adds.