Best FX liquidity provider of the year: UBS

A few years ago, when the performance of its foreign exchange system began to fade, UBS knew it had a problem that needed immediate attention. To get to the heart of the challenge, senior managers asked clients to be frank about the pros and cons of trading with the bank.

The responses, more honest than brutal, helped to change and improve how UBS distributes liquidity and services its clients. Over a 12- to 18-month period, what UBS calls the Strategic Development Lab (SDL) – a group of experts across electronic trading, technology and data science – made several enhancements to the bank’s system and platforms. They enhanced its analytics and alerts, and UBS strengthened its front-office headcount with quant traders and other expertise within that domain.

Today, UBS has morphed into a top-notch liquidity provider with whom the rest of Wall Street will have to contend for client loyalty. The bank has been voted Best FX liquidity provider of the year in the 2019 FX Week e-FX Awards.

Since 2018, UBS has been steadily introducing technology that boosts its spot-streaming capability, improves pricing – clients indicated to the bank it was static, but comparable – and minimises market impact.

“What we wanted to do was identify avenues where we were leaking information off our inventory through pricing, which we perceive to be the biggest component of the information leakage,” says Srichakri Adhikarapatti, head of SDL FX quant trading at UBS. 

FX liquidity provision has evolved from showing the best price to also showing the right information. That is why, for clients, the avenues of alerting and analytics become quite important

Srichakri Adhikarapatti, UBS

“A large proportion of what we did through our technology platform and our system, which we called ‘Tree’, was geared towards doing that. While no work is fully complete, and we can never say that we are in a state where everything is perfect, I think we are in a much better state than we were before we embarked on this architecture work,” he adds.

Plugging the leaks was only one part of the challenge. The FX landscape was – and still is – changing, and UBS had clients with distinct views of what they expected from a liquidity provider.

With the trading system on a par with those considered best-in-class, the bank started focusing on having the right analytics that would highlight not only system issues but also problems where clients were finding difficulties trading with the bank. This can now be done in real time, and flagged up to the right people in the trading team who can promptly identify and address it.

They make every effort to service our trading requirements. Consistency has been outstanding

A UBS client

“FX liquidity provision has evolved from showing the best price to also showing the right information. That is why, for clients, the avenues of alerting and analytics become quite important,” Adhikarapatti says. “Reaching out to our clients as quickly as possible when there is an issue, or reaching out to them with the right sort of information for us to be able to optimise the business between us and the client, is high priority.”

The investments have paid off. Clients say they see UBS as a long-term partner that delivers best-in-class liquidity.

“UBS is consistently relevant as a liquidity partner,” one client tells FX Week. “They make every effort to service our trading requirements. Consistency has been outstanding. Coverage across time zone, currency pair and venue has been excellent.”

That’s exactly the kind of review that Ben Gough, head of FX, rates and credit e-trading for Europe, the Middle East and Africa, hopes the team receives whenever they go before a client. It tells him UBS is doing something right.

“If you look on the spectrum of anonymous market interaction through to partnership interaction, over the past year or two, you have seen the scale tip more toward the partnership side of things with clients,” Gough says, adding that they recognise the value of speaking to someone about customising their liquidity and execution.