Best FX options house: UBS

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Best FX options house: UBS
FX Markets Asia FX Awards 2022 BB8


Customer focus, innovation, depth and breadth of options offerings secure UBS the Best FX options house award

At the heart of everything UBS does in its Asia-Pacific (Apac) FX options operations lies a core commitment to being a reliable and innovative partner to its clients, as well as being able to provide technology, liquidity and personnel support across all market conditions. During 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, this core commitment enabled UBS to increase its FX options client base across the Apac region, maintain strong momentum in its wallet share and sustain its ranking as one of the top liquidity providers in the region.

The basis for these ongoing achievements is UBS’s development over the past two years of its FX Engine Room, which places all of the bank’s analytics in one location for ease of access by its global salesforce. By utilising this resource, UBS’s FX options salespeople are perfectly equipped to analyse the needs of all clients and clearly identify specific areas in which the bank can fine-tune products and delivery. This might include tweaking pricing in response to changes in UBS’s hit ratio, addressing a particular profit-and-loss decay profile in client activity or drilling into reasons behind any failures to quote.

This granular-level analysis of historical trading patterns also means UBS can undertake a focused outreach to source offsetting liquidity or to fill specific trading axes as they arise. This, in turn, enables UBS to deliver a high-quality personalised service to clients. This adaptive and proactive approach allows UBS to stay sustainably competitive, whatever the market conditions, while allowing it to further improve its offerings.

Foo-Weng Cheng
Foo-Weng Cheng

Predating the development of UBS’s FX Engine Room by around two years was a significant technology upgrade to its FX options business, to better execute large trades and more effectively offload risk in low-liquidity, low-volatility and rapidly compressing spread environments. This technology overhaul resulted from the bank boosting its IT spend by transferring staff from its group technology team into the FX business’s front-office e-options team. It is here that quant engineers sit back-to-back with options traders to develop the pricing and analytics functionality in UBS’s T-Pricer options trading platform.

UBS rolled out T-Pricer globally in 2021 through its UBS Neo platform. Aside from pricing and executing trades from vanillas to complex exotics, T-Pricer allows clients to use 20 years of volatility data collated by UBS to run pre-trade analysis on any permutation across 400 products and run post-trade analytics. Users can also reprice structures using different tenors and strategies, and run grids with multiple variables to see how the value of an option changes over time. For structured products, such as dual-currency deposits, users can work out the coupon that would be paid depending on the maturity and strike price. They can also create option alerts as a reminder to restructure a trade or be notified of desired entry points.

The release of T-Pricer marked a total transformation in the way UBS communicates with clients about FX derivatives, allowing the bank to utilise a strategy of differentiation in its FX options offerings rather than one dependent on price alone. That dovetails with the key goal of UBS’s FX options business in Apac: to support clients as they generate new trading ideas and seek to execute these efficiently. Post-execution, UBS’s strategy is to support clients in monetising the positions they have traded with the bank. In sum, UBS’s T-Pricer platform has allowed derivatives trading to turn into more of a service that enables clients to trade better and manage their positions more effectively.

This template has also been applied to building out UBS’s market-leading franchise in exotic FX derivatives. In this field as well, the emphasis is on pre-trade (for example, backtesting historical payouts) and post-trade analytics (such as automatic restructuring suggestions) on an extremely broad product offering (more than 350 option payouts available). Again, UBS’s ability to skew pricing on its e-options quotes, thereby moving large risks more efficiently, has helped it to internalise flow matching. This means offsetting client trades internally and avoiding external venues. UBS implemented this process across developed as well as emerging markets pairs, utilising tools and bots to help sales teams match up client axes more effectively with data analytics and statistics. This resulted in internalisation rates rising to 92% for developed markets and to 87% for emerging markets.

“Our clients value us for consistently being one of their top liquidity providers, ranking within their top three with a market share that exceeds 10–20% each month across various currency pairs,” says UBS.

“Our pricing remains competitive and stable regardless of market conditions, and our extremely strong sales coverage also supports the franchise by ensuring the business runs smoothly and grows steadily,” the bank concludes.


UBS was named Best FX options house at the 2022 FX Markets Asia FX Awards.

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