Order Driven Execution (ODE) Henrik Alsøe, Neil Browning, Tom Lee, Magnus Sundby

Transcription

1 Order Driven Execution (ODE) Henrik Alsøe, Neil Browning, Tom Lee, Magnus Sundby

2 Agenda 1 Rationale for Change 2 Summary & timeline 3 Trade Ticket & Execution Style 4 Platform Presentation

3 Rationale for Change - WHY The way that Saxo executes client trade requests is changing from a Quote Driven Model (green pricing) to an Order Driven Model. An Order Driven Model provides an executable price provided to clients that is based on Saxo s own liquidity, in addition to liquidity available on a DMA basis in the broader market. The client is provided with greater control over the way that their order is traded through user defined Price Tolerance, with the potential for benefiting from price improvement. 3

4 Rationale for Change - WHY 1. Regulatory Requirements Early adopter of the FX Global Code and new best execution guidelines under MIFID II Processing changes mandated by FSA after SNB event while working within internal technical constraints 2. Improved Risk Management for Saxo Bank Removing the promise of firm liquidity at a guaranteed price i.e. Liquidity Mirage Thus insuring against a situation where we would need to retrospectively amend trades Offer our liquidity within the bank s risk appetite, offer DMA access when outside those tolerances 3. Opportunity for Saxo to Differentiate Ourselves in the Industry By becoming more transparent in the way that we handle client orders, thus enhancing our best execution practices. Early adoption of regulatory requirements (MIFID II Best Execution Policy) and the forthcoming release of the FX Global Code are the key drivers in defining ourselves as the most transparent and responsible FX and CFD trading provider. 4. Functional Enhancements Price Tolerance greater control over the way that a client order is traded (Control) Price Improvements will be passed back to the client (Transparency) Partial Fills through both IOC (Immediate-or-Canel) and Resting orders (Access) Extend the breadth of liquidity available to clients Published performance statistics as soon as we have begun to collect them (Trust) 4

5 Summary & Timeline Saxo Bank Continues Reform of our Professional Experience 1. Fits well into our vision to position ourselves as an industry leader when it comes to being transparent and a responsible partner Roll out of Commission based pricing Providing clients with tiered margins (responsible leverage) Fixed wrong sided orders, Stop if Bid and Stop if Offer Removal of Guaranteed Stops 2. Transparency & Control: Gives us great talking points to clients about the huge benefits of moving from trades to orders with addition of new functionality Empower clients to be in full control i.e. manage their own tolerance Possible improvements in fill rates Availability of partial fills 5

6 Summary & Timeline 3. Rollout Timeline Press release 26 September 1st general client communication week of 26 september Proof of Concept functional roll to CH & SA - 7th & 12th OCT respectively Demo Environment 14th NOV (WLP and Co-branded IB) Global Launch Week of 14th NOV Evaluate response with a backstop option to return to Green Pricing if deemed necessary WLP and Co-branded IB rollout Week of 21st NOV 6

7 Summary & Timeline 4. Client Response Expectations & Mitigation Efforts Given historical client behaviours and trading habits 99.93% of orders would be unaffected by change in normal market conditions, so not expecting material backlash Could even create easier cross sell opportunities by aligning FX Spot/Forward and CFD Indices, Commodity, Interest Rate and Bond products with the order execution methodologies of other asset classes Global regional training has been organized along with WLC webinars External datasheet created for distribution outlining functional changes to the trade ticket 7

8 Trade Ticket and Execution Style Sell/Buy Prices. Click Buy or Sell to place a Limit Order with a pre-defined Price Tolerance. Adding Price Tolerance ensures that your order is only executed within a range that you are comfortable accepting (see Edit Price Tolerance). The minimum price (when selling) and maximum price (when buying) are displayed on the Trade Ticket below the Spot Price i.e. x.xxxx Type. Select the order type that you wish to use to enter a position: Quick Trade orders for immediate execution, with or without a pre-defined Price Tolerance. Resting Limit, Market and Stop orders for longer durations i.e Day Order, Good Til. Cancelled etc) Edit Price Tolerance (cross (x)-icon). Allows you to remove the option of adding Price Tolerance. This changes the Quick Trade order from a Limit Order to a Market Order. 8

9 Trade Ticket and Execution Style Edit Price Tolerance. Price tolerance enables you to define the minimum price (when selling) or maximum price (when buying) that you are comfortable accepting (i.e. a Limit Order) when entering a position. Price tolerance can specified in pip (i.e. 0.1 pips) or percentage terms (i.e. 0.01%). The default is set to 0.01% of the Spot Price for all currency pairs, but is configurable on an individual currency pair level. Pips. Set your tolerance in pip terms, in increments of 0.1 pip (1/10 th of a pip) Percent. Set your tolerance in percentage terms, in increments of 0.01 percent (1/100 th of 1 percent or 1 basis point) 9

10 Questions?